Cabinet approves 2-year budget, including $2.4 billion boost for Ben Gvir’s ministry
Tourism minister boycotts vote over plan to end VAT tax exemption for tourists; PM’s plan for free education for kids under 3 not included, but ministers commit to advancing it
The cabinet on Friday voted to approve a two-year budget for 2023 and 2024, readying it for a Knesset vote that is expected to shore up Prime Minister Benjamin Netanyahu’s hardline government for the next two years.
The budget for 2023 will stand at NIS 484 billion ($131.3 billion) — an $8.55 billion increase from last year — before climbing to NIS 514 billion ($139.5 billion) in 2024.
One of the budget’s biggest beneficiaries was National Security Minister Itamar Ben Gvir, whose office is set to receive a $2.44 billion boost. He had originally demanded a $3.8 billion bump and boycotted a meeting on the matter earlier this week as negotiations hit a blip. The extra money will be used to recruit thousands of additional police officers, over 1,200 new prison guards and hundreds of firefighters. It will also allow a pay raise for police officers and prison guards in the coming year, in addition to the establishment of a national guard.
Not present for Friday’s vote was Tourism Minister Haim Katz, who boycotted it in protest of the government’s plan to end the VAT tax exemption for tourists.
The Education Ministry budget will enjoy a $3.8 billion increase compared to 2022, which will allow for a new plan to reduce disparities between students of different backgrounds and another plan to boost special education programming.
Not included in the budget though was funding for a plan to provide free education for children up to three years old — a Netanyahu campaign pledge. However, a clause was included to the proposed budget stating that the government will commit to advancing free education for children ages 2-3, which would cost $1 billion in the first year alone. The initiative is opposed by the Finance Ministry over fears that it will overburden the state’s coffers.
The budget does include a boost to the Health Ministry’s budget that will go toward adding beds to over-crowded hospitals across the country in addition to mental health programming.
To make room for the additional spending, each ministry agreed to a three percent baseline cut in funding.
The state budget will now be sent to the Knesset for markup and a vote on the first reading of the bill is expected by the end of March.
Netanyahu hailed the cabinet’s approval of the budget, saying in a statement, “We want to show that the tradition we have created here in the State of Israel, of a free economy with fiscal and monetary responsibility, and coordination between them, and independence for the Bank [of Israel], are valid for us always, especially at this time. I think that this budget does this and it also does it against the backdrop of the best macroeconomic data that I can remember in all my years on the job.”
“The Israeli economy is strong and steadfast. With the across-the-board support of the ministers today, it is even stronger,” he added.
The cabinet vote came as the list of economists warning of the potential for financial fallout as the government advances its judicial overhaul plan has continued to grow.
The Finance Ministry’s own chief economist, Shira Greenberg, issued an official warning in the risks chapter of the 2024-2027 budget forecast published earlier this week. “To the extent that the judicial reform is perceived by the market as damaging the strength and independence of state institutions in addition to increasing uncertainty in the investment environment, this may harm economic activity and private investments in particular,” she wrote in a report published Thursday.
And during deliberations Thursday on the budget, Bank of Israel Governor Amir Yaron reportedly warned ministers that an economic crisis could break out at any moment.
On Wednesday, former Bank of Israel chief and JP Morgan Chase International chair Jacob Frenkel said that the government’s efforts to weaken the judiciary could leave the economy in shambles and dismissed the current attempts by the coalition to calm the mounting economic concerns as “an insult to people’s intelligence.”
“It should worry us very much,” Frenkel told Channel 12 news when asked about the weakening of the Israeli shekel, which over the past month has lost almost 10 percent of its value relative to the US dollar.
“The [value of the] shekel is a reflection of the reality behind it. We have a situation of total uncertainty — economic uncertainty, political uncertainty and institutional uncertainty, which affects all components of the economy: Consumers, manufacturers, investors, the ordinary citizen,” he said. “And this uncertainty is homemade, it isn’t an external shock.”
Netanyahu told cabinet members on Thursday that “those who are sowing hysteria and fear will be proven wrong.”