Clearing path for budget vote, MKs pass Economic Arrangements Law as Haredim back down
Ben Gvir’s return to the coalition defangs UTJ chief Yitzchak Goldknopf’s threat to scuttle 2025 state budget unless law exempting yeshiva students from IDF service is passed first
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"
Following an all-night debate interrupted by the launch of a Houthi missile from Yemen, lawmakers early on Thursday morning voted 63-50 in favor of the final reading of the so-called Economic Arrangements Law, a key step in passing the 2025 state budget.
The Arrangements Law — which determines how funds will be disbursed — is usually the final step before passing the budget.
Touting its passage, Finance Minister Bezalel Smotrich claimed the measure included “massive sums” for IDF reservists and for the rehabilitation of the war-battered north and south of the country.
“We are providing a response to all the needs at the front and home front, supporting reservists at unprecedented levels, because they deserve it,” Smotrich declared, arguing that despite the “longest and most expensive war” in Israeli history, the national economy “is strong and resilient.”
Opposition politicians, by contrast, accused the coalition of allocating vast sums to unnecessary ministries and to ultra-Orthodox causes in order to keep the government together at taxpayers’ expense.
Under the Arrangements Law, the 2025 state budget will reach NIS 619 billion ($169 billion).
The State Budget Frameworks Law, which was also approved 62-50 early on Thursday morning, set the deficit limit at 4.7 percent of GDP and increased government expenditures by around NIS 70 billion ($19.1 billion) — a 13.6% increase over 2024.
If the coalition does not pass the budget by March 31, the Knesset will automatically be dissolved — by law — and new elections called. The Knesset Finance Committee is expected to advance the budget to its final readings on Sunday, just over a week before the deadline.
A controversial budget
Opposition lawmakers have harshly criticized the government for its plans to cut around NIS 3 billion ($814 million) across various ministries — affecting the salaries of public sector workers such as teachers and social workers while not touching funds for ultra-Orthodox educational institutions.
At the same time, the cabinet recently approved the allocation of NIS 5 billion ($1.3 billion) in discretionary coalition funds, including NIS 1.27 billion ($351 million) for ultra-Orthodox yeshivas.
In addition, Channel 12 reported on Monday that several government ministries previously classified as superfluous by financial experts are set to receive a substantial last-minute funding boost in the 2025 state budget.
These include a 194% increase in the budget of Orit Strock’s Settlements and National Missions Ministry and a 321% increase in that of Meir Porush’s Jerusalem and Jewish Tradition Ministry.
Railing against the budget in the Knesset plenum overnight, Opposition Leader Yair Lapid accused the government of playing politics at the expense of taxpayers’ welfare.
“If Israel’s economic situation has never been better, why did you raise taxes? If you hadn’t distributed millions in coalition funds, you wouldn’t have needed to raise the VAT, and every Israeli citizen wouldn’t be seeing prices increase at the supermarket,” he said.
“You raised taxes not because of the war, but to spend the money on yourselves,” Lapid charged.
Benny Gantz, the chairman of the opposition National Unity party, accused the government of passing a budget aimed at securing its own political stability.
“How is it that there are billions for coalition funds, but after such a great disaster, there is no plan that will turn the western Negev and the north into a picture of our victory? How is it possible to raise taxes, cut education, and not set even a little personal example and close 4-5 unnecessary government ministries,” he asked, accusing the government of having “failed to rise to the occasion.”
The Arrangements Law was also opposed by Deputy Minister Avi Maoz, the sole lawmaker representing the anti-LGBTQ Noam party, who has threatened to resign over what he described as discrimination against Religious Zionist educational institutions.
In a video posted to Twitter ahead of the vote on Wednesday, Maoz complained that national religious IDF reservists who have fought for months on end have to “pay a fortune for their children’s education, which was supposed to be included in the Free Compulsory Education Law.”
Stating that he “can no longer remain silent in the face of the ongoing harm” to reservists, Maoz said he would vote against the budget and resign if this “injustice is not corrected by Monday.”
A Haredi reversal
The passage of the Arrangements Law and the State Budget Frameworks Law was made possible by Otzma Yehudit chairman Itamar Ben Gvir’s decision to return to the coalition after a two-month interregnum.
Only hours earlier, Ben Gvir and two other members of his far-right party, which had previously opposed the budget, were sworn in as members of Prime Minister Benjamin Netanyahu’s cabinet — bringing the coalition majority to 68 seats in the 120-member Knesset and ensuring that the prime minister’s ultra-Orthodox allies would not be able to block the bills’ passage, as some had threatened to do.
Writing to the prime minister earlier this month, three MKs belonging to the United Torah Judaism (UTJ) party’s Hasidic Agudat Yisrael faction had warned that they would vote against the budget unless a law exempting yeshiva students from mandatory military service was passed first.
Ultra-Orthodox lawmakers have been split on their tactics, with the Sephardic Shas party and members of UTJ’s non-Hasidic Degel Hatorah faction opposing Agudat Yisrael’s confrontational approach.
Following Ben Gvir’s return, UTJ chairman Yitzchak Goldknopf appeared to back down from his threats, with all of his Agudat Yisrael faction’s MKs voting in favor of the Arrangements Law on Thursday morning.
According to the ultra-Orthodox Kikar Hashabbat news site, the Gur Hasidic rebbe had instructed Goldknopf to sign on to an alternate plan to pressure Netanyahu advanced by members of Degel Hatorah.
That plan would see the entire UTJ party united in threatening to withdraw from the government unless it passes an exemption bill within three months.
A bill dealing with the issue of Haredi IDF service, or the lack thereof, is currently stuck in the Knesset Foreign Affairs and Defense Committee, whose chairman, Likud MK Yuli Edelstein, has said that the needs of the IDF must come first and that the panel would only advance the legislation if it legitimately addresses those needs.
Any effort to ensure its swift passage would be further complicated by the fact that the Knesset is expected to go on a one-month recess at the beginning of April.
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