Cabinet approves 2024 budget, making cuts to offset massive wartime defense boost

One Likud and five National Unity ministers vote against wartime budget to protest across-the-board reductions and failure to curb extraneous ministries

Sam Sokol is the Times of Israel's political correspondent. He was previously a reporter for the Jerusalem Post, Jewish Telegraphic Agency and Haaretz. He is the author of "Putin’s Hybrid War and the Jews"

Members of Prime Minister Benjamin Netanyahu's cabinet during a meeting to approve the amended 2024 budget, January 15, 2024. (Haim Zach, GPO)
Members of Prime Minister Benjamin Netanyahu's cabinet during a meeting to approve the amended 2024 budget, January 15, 2024. (Haim Zach, GPO)

Overcoming strong opposition from within his own government, Prime Minister Benjamin Netanyahu managed to push an amended 2024 state budget worth NIS 582 billion ($155 billion) through the cabinet on Monday, pairing an overall spending increase of around NIS 70 billion ($18.6 billion) with widespread budget cuts, in order to pay for the war in Gaza.

The extra funding includes money for defense and compensation for those impacted by the war, along with higher allocations for healthcare, police, welfare, and education.

“We reached an agreement, and we will now pass a very important budget. This is the war budget, which also takes care of the needs of our reservists, their families, the self-employed, and government ministries, and the needs of the public,” Netanyahu declared.

“We are increasing the health budget and adding a billion shekels to it for mental health, an important need,” he said. “There are increases to the education budget, the welfare budget, the internal security budget, but most importantly, the defense budget, which is simply essential for victory and for our future.”

The measure, which contains a deficit target of 6.6% of GDP, passed only hours after an all-night meeting on the matter ended inconclusively in the face of ministerial opposition to across-the-board budget cuts. It will now go to the Knesset, where it must pass three readings in the plenum in order to become law.

During that meeting, tensions over planned cuts rose to the point that Education Minister Yoav Kisch, of the premier’s own Likud party, stormed out of the room in a rage, over the proposed reduction of his budget by hundreds of millions of shekels.

Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich during a cabinet meeting convened to approve the 2024 amended state budget, January 15, 2024. (Haim Zach, GPO)

Since then, Netanyahu and Finance Minister Bezalel Smotrich appear to have been working to bring around opponents of the wartime budget, such as National Security Minister Itamar Ben Gvir, who announced that he had reached an agreement to secure NIS 2 billion ($532,959,800) in additional funding for his ministry.

Culture and Sports Minister Miki Zohar, another critic of the budget, also reached an agreement with the Finance Ministry, announcing earlier on Monday that he had accepted a “horizontal cut in all sections of the ministry without exception in the amount of about 8%, which is about NIS 180 million ($48 million).”

With some exceptions, the new budget mandates an across-the-board spending cut of 3% from all government ministries, in order to pay for the increase in security spending.

Also being cut are around NIS 2.5 billion ($670 million) out of NIS 8 billion in coalition funds — discretionary funds earmarked for pet projects of MKs and ministers.

According to the financial daily Calcalist, this includes NIS 750 million ($200 million) for ultra-Orthodox schools and yeshivas and NIS 280 million ($75 million) for the Settlements and National Missions Ministry.

Despite this, the budget was welcomed by United Torah Judaism Chairman Yitzhak Goldknopf, the housing minister, who expressed satisfaction that it had “maintained the budgets of the Ministry of Construction and Housing for the sake of continuing the construction boom and solutions to the housing crisis, alongside the budgets we agreed upon on the eve of the establishment of the government.”

Prime Minister Benjamin Netanyahu, left, and Housing Minister Yitzhak Goldknopf, right, arrive for the weekly cabinet meeting at the Prime Minister’s Office in Jerusalem on September 27, 2023. (Chaim Goldberg/Flash90)

Members of Netanyahu’s cabinet came out strongly against the the Finance Ministry’s initial wartime budget proposal, under which the Education Ministry budget would have been cut by some NIS 891 million ($239 million), that of the Health Ministry by NIS 440 million ($118 million), and the Welfare and Social Affairs by NIS 163 million ($44 million).

The amended budget ran into opposition from the National Unity party, with ministers Benny Gantz, Gadi Eisenkot, Gideon Sa’ar, Hili Tropper and Yifat Shasha-Biton voting against it.

“Politically difficult decisions and decisions that constitute a personal example,” such as pay cuts for senior officials, “would make it easier to mobilize the public to face the difficult economic reality, but these are missing in the budget proposal brought to the government,” Sa’ar told the cabinet.

Communications Minister Shlomo Karhi (Likud) also voted against the budget, following his earlier warning that the budget cuts could harm the nation’s communications infrastructure in a way that could potentially “endanger lives.”

However, following the meeting, he stated that Netanyahu had promised him NIS 40 million to prepare the country’s telecommunications infrastructure for “emergency situations” and announced that he had entered into talks with the Finance Ministry about the issue.

Opposition criticism

In a statement, Gantz’s National Unity party argued that the new budget “does not reflect the necessary fundamental change of priorities and ignores the heavy consequences of the war.”

It failed to implement “a significant downsizing of government ministries, the freezing of Norwegian law and the salaries of Knesset members, and a more significant cut in coalition funds,” asserted the party, which entered the government in order to help manage the war.

Opposition Leader Yair Lapid’s Yesh Atid party also slammed the budget as “a government of failure,” expressing consternation that the budget contained “no reduction of unnecessary government offices and no cancellation of coalition funds.”

“Instead of approving a budget that helps evacuees, reservists and strengthening the sense of security, once again the government and its leader approved a shameless and irresponsible political budget,” it said.

Notably, the current plan does not contain any provisions for reducing the number of government departments, despite the Finance Ministry’s recommendation that 10 superfluous ministries — including the Settlements and National Missions Ministry, the Jerusalem and Jewish Tradition Ministry and the Intelligence Ministry — be closed to cover the wartime shortfall.

IDF troops operate in Gaza in a handout image cleared for publication on January 9, 2024. (Israel Defense Forces)

While Knesset lawmakers okayed state budgets for 2023 and 2024 — totaling nearly NIS 998 billion ($270 billion) — last May, the outbreak of war in October upended the government’s fiscal plans, forcing legislators to pass a NIS 28.9 billion ($7.85 billion) supplementary budget for 2023 in December, in order to cover the costs of the ongoing fighting with Hamas and Hezbollah, as well as civilian expenses, such as accommodation for evacuees from the north and south.

But controversially, the amended 2023 budget also included hundreds of millions of shekels in coalition funds, which professionals in the Finance Ministry said should have been halved.

The war with Hamas — which began on October 7 when the terror group led a surprise cross-border onslaught, killing some 1,200 people, the large majority of them civilians, and taking some 240 people hostage — is reportedly costing Israel at least NIS 1 billion ($269 million) a day.

Israel has spent billions of shekels on arms procurement and payments for IDF reservists, housing evacuees, and measures to bolster civilian security arrangements inside Israel.

Among these initiatives are NIS 18 billion ($4.9 billion) outline to rehabilitate and develop Gaza border communities and a NIS 9 billion ($2.5 billion) wartime assistance program for the hundreds of thousands of IDF reserve soldiers mobilized in the wake of Hamas’s brutal attack on October 7.

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