For the first time in three years, Israel’s cabinet voted on Monday to approve a new state budget, the first of a number of hurdles the legislation must clear ahead of the November 4 deadline, upon which the government’s survival depends.
The complex 2021-2022 budget ($187 billion for 2021, $173 billion for 2022) must now pass through committee stages and three readings in the Knesset plenum by the deadline. This marks a key challenge for the coalition, which holds an extremely narrow parliamentary majority.
If it does not pass by then, the Knesset would automatically dissolve and new elections would follow.
Israel’s state budgets include not only a document laying out the numbers, but also a secondary piece of legislation with the structural, institutional and policy reforms needed to make it work.
The last approved state budget was for 2019, before the country became embroiled in two years of political gridlock. That budget was passed in March 2018.
If the new budget does pass Knesset approval, here are the main changes it would have on the Israeli economy and society:
Israel plans to open up the economy to allow the import of products that comply with international standards, without needing to receive domestic regulatory approval.
The move means that Israel will effectively adopt the basic regulatory standards currently in force in the US and EU. The reform would apply to electronics, food, cosmetics, toys, and more.
However, certain products, such as baby food and meat, would still need to be approved by Israeli standards.
Nearly all imports to the country today require domestic regulatory approval, even if they comply with EU or US standards.
The Finance Ministry said this move will save some NIS 5 billion annually.
Women’s retirement age
The retirement age for women is to be increased from 62 to 65 incrementally over an 11-year period, the Finance Ministry said.
Israel currently has one of the lowest ages of retirement for women in the world, making it harder for older women to find jobs if they choose to work and resulting in a dramatic increase in payments of elderly benefits.
At the same time, there will be funding for training programs and scholarships to further integrate women into the job market, as well as an extension of unemployment benefits for older women to 12 months.
The reform is expected to increase the employment rate of older women, decrease the gender salary gap, and stabilize the funds of the National Insurance Institute, the ministry said.
Reforms in the agriculture sector are aimed at allowing the import of produce, including eggs, from abroad.
The Finance Ministry said it would adopt European regulation standards on the import of produce.
It added that the reform would increase investments in farmers that will lead to a technological leap in the agricultural industry.
Finance Minister Avigdor Liberman and Agriculture Minister Oded Forer, both of the Yisrael Beytenu party, said the intention is to reduce too-high prices for consumers.
The move is opposed by farmers and fresh produce providers, who say it will destroy their livelihoods.
In a separate reform, restrictions are to be lifted on the export of medical cannabis, and allow the growth of the legal marijuana industry in the country.
Currently, the Chief Rabbinate has a monopoly over kosher certification in Israel.
The budget includes a plan advanced by the Religious Affairs Ministry that would overhaul the kosher certification industry by establishing a series of private kosher certification agencies that will be required to uphold religious standards established by the Chief Rabbinate.
The private agencies will be authorized to issue certifications that note they are “under the supervision of the Rabbinate.”
Each agency is expected to be headed by a rabbi who is certified by the city’s local rabbinate. The agencies — which will also need to demonstrate financial viability — will make public the religious standards they are maintaining in their certification.
The plan would see the creation of an overarching supervisory body of the Chief Rabbinate to monitor the private agencies and ensure they uphold the standards they have promised to meet.
Business sector regulation
New laws are to be passed that would ease regulatory restrictions on businesses in order to increase competition and reduce prices for consumers, the Finance Ministry said.
The plan is expected to make it easier for businesses to recover from the COVID-19 pandemic, and bring about a 6% growth in GDP per capita within a decade worth some NIS 75 billion, the ministry said.
Another reform plans to reduce bureaucracy when registering a company in Israel’s Registrar of Companies.
Metro in Tel Aviv area
The Tel Aviv area proposed subway system is to be advanced, according to the Finance Ministry.
The project is to be prioritized by all relevant government ministries, allowing it to be built on schedule, apparently by 2032. The ministries will advance dedicated regulatory arrangements for the subway to further its development.
The new state budget also includes a dedicated budget of NIS 150 billion for the subway’s construction and approval, the Transportation Ministry said.
New regulation would end the monopoly of consumers’ financial information held by banks, and would allow customer information to be transferred to external technological companies, with their consent.
The new entities would be able to show clients what financial services they are paying for and how much they could save if they were to switch to another provider.
The Finance Ministry said the move will allow the external companies to become objective personal digital financial advisers for consumers.
From 2024, drivers entering the Tel Aviv area during rush hour will be required to pay a fee.
The move is aimed at reducing congestion, pollution and traffic accidents during peak hours, the Finance Ministry said,
Revenues from the new fee will bring in some NIS 2.7 billion over five years, the ministry said.
At the same time, funding will be provide for a public transportation infrastructure development program. The expected increase in public transportation will lead to an improvement in the quality of travel, faster travel times, and an increase in the frequency of transport lines, the ministry said.
According to the Transportation Ministry, a cumulative investment of NIS 7.5 billion over the next five years will be used to increase services around the country.
The program includes the recruitment and training of thousands of public transportation drivers, and the purchase of 3,500 buses over the next five years, of which 2,500 are to be electric, the ministry said.
Health Minister Nitzan Horowitz reportedly secured a NIS 2 billion ($619 million) increase in funding for health care. The Health Ministry budget will now stand at NIS 5 billion ($1.5 billion).
Horowitz’s office said the funds would be used in a number of areas, including NIS 400 million for the building and renovation of mental health centers and psychiatric hospitals, according to Channel 12 news.
An additional NIS 100 million will be injected into the state subsidies that pay for medicines and technologies that are provided to patients. It will now stand at NIS 600 million.
At least six new MRI machines will be placed in medical centers in Israel’s periphery, the Health Ministry said according to the outlet.
Meanwhile, the budget for public hospitals will also be increased to the tune of NIS 500 million, the network said.
The New Hope party, which controls the Housing Ministry, said it achieved a number of significant benefits for Israel’s elderly population, including obtaining 1,700 apartments for older people and building 3,000 more.
The new budget will allow the ministry to advance a plan to subsidize first home purchases for young couples, New Hope said.
Stipends for those with disabilities and the elderly
According to the New Hope party, stipends for those with disabilities and the elderly are to be increased to 70% of the minimum wage.
Ahead of budget discussions, protesters had demanded a match to the NIS 5,300 ($1,500) minimum salary.
New Hope, which also heads the Education Ministry, said that NIS 500 million is to be used to advance a program intended to increase the autonomy of school principals.
Another NIS 200 million is to be used to fund a plan to supervise and oversee daycare centers for children up to the age of three, which until recently had been excluded from Education Ministry regulations.
Sugary drinks and disposable utensils
Taxes to be levied on sugary drinks will be set at NIS 1.3 per liter of beverage containing more than five grams of added sugar per hundred milliliters, and at NIS 0.7 for beverages containing less than five grams of added sugar.
The move is expected to bring an estimated NIS 300 million annually into state coffers, the Finance Ministry said, as well as health benefits.
A similar tax will be imposed on plastic and disposable utensils, as the annual household consumption of disposable plastic products is some 7.5 kilograms per capita, worth some NIS 1.3 billion in total. According to the ministry, these figures are five times higher than in the EU.
In order to reduce the high consumption, the government plans to impose a tax of NIS 11 per kilogram of plastic utensils. The move is expected to bring in some NIS 800 million annually, the ministry said.
New reforms aim to continue the digitization of government services, in order to reduce bureaucracy.
The Finance Ministry says the move can save Israeli taxpayers some NIS 200 million annually.
Fire safety regulation
Israel plans to adopt Western standards when it comes to fire safety in new buildings.
A reform plans to list all fire services’ regulations into law by 2026 in a move that is expected to save businesses millions annually, the Finance Ministry said.
The budget will also raise the defense budget for 2022 to NIS 58 billion ($17.8 billion), according to a government statement last week. That will include a substantial increase — some NIS 7 billion ($2.15 billion), according to the Kan public broadcaster — for “rearmament and strengthening the Israel Defense Forces” to prepare the military for a potential strike on Iran, according to the statement from the prime minister, defense minister, and finance minister.
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