Netanyahu, Ben Gvir reach spending deal, removing last hurdle to passing budget

After a three-hour meeting, Prime Minister Benjamin Netanyahu on Monday evening resolved with National Security Minister Itamar Ben Gvir to increase funding for a ministry held by the latter’s far-right Otzma Yehudit party, clearing the last key hurdle to passing the 2023-2024 state budget.

According to a copy of the signed agreement, the Negev and Galilee Ministry will receive an additional NIS 250 million ($68.3 million) in 2024, with the money coming from leftover funds that other government ministries do not spend from their budgets this year.

If there are insufficient surpluses, the budget for all other ministries will be retroactively cut to hand the ministry the necessary amount for 2024.

In exchange for the promised spending, the agreement says all Otzma Yehudit lawmakers will vote for the budget when it comes up for its final plenum readings.

The budget must be passed by May 29 or the government will automatically fall, with snap elections called. Ben Gvir had threatened to not back the budget if his demand for the additional hundreds of millions of shekels for the Negev and Galilee Ministry was not met.

Ben Gvir hailed the budget agreement as “good news” for residents of the Negev and Galilee, saying Otzma Yehudit was delivering on an election pledge.

“We said again and again that residents of the Negev and Galilee cannot be discriminated against,” he said in a statement.

Negev and Galilee Minister Yitzhak Wasserlauf also praised the deal, saying the development of the two regions was “at the top of our priorities.”

File: National Security Minister Itamar Ben Gvir (right) and Negev, Galilee and National Resilience Minister Yitzhak Wasserlauf, in Jerusalem, January 2, 2023. (Olivier Fitoussi/Flash90)

During a visit Sunday to the flashpoint Temple Mount, Ben Gvir noted his party’s demands for more budgeting to increase the Jewish presence in the Negev and Galilee, alluding to the fact that those areas have large Arab populations.

“In the coming budget we must invest in the Negev and Galilee,” he said. “Jerusalem is our soul, the Negev and Galilee are our life force. We must act there, we must be sovereigns also in the Negev and in the Galilee, and the basis is the budget.”

There was no immediate response to Monday’s decision from Netanyahu’s Likud party or from Finance Minister Bezalel Smotrich, who has reportedly balked at demands to further expand the state budget.

Earlier Monday, Netanyahu and Smotrich pledged to boost funding for ultra-Orthodox yeshiva students and their families by up to NIS 250 million, in exchange for United Torah Judaism party’s support for the state budget.

Similar to the deal with Otzma Yehudit, Likud said the funds would be transferred from within the current two-year budget.

The last apparent holdout is far-right coalition MK Avi Maoz, who threatened as recently as Friday to vote against the budget if his Jewish national identity office is not awarded hundreds of millions of shekels, as promised in coalition deals with Likud. But as his Noam party has only a single seat, Maoz’s vote is not necessary to pass the budget.

The agreement with UTJ was protested by Yisrael Beytenu chief Avigdor Liberman, who said his opposition party will petition the Knesset’s legal counsel to contest it.

Liberman, a former finance minister, argued that any remaining funds at the end of the year must return to the Treasury to be used to cover state debt and not as a budget source.

“It’s blatantly illegal,” he, said speaking at the outset of his faction meeting at the Knesset.

Liberman, who, over the past few years has been fiercely critical of the ultra-Orthodox community’s under-participation in the workforce and the military, slammed the budget for providing “negative incentives” to join or prepare for the workforce.

The budget in general, he said, was “a giant black mark that pollutes all of the professional economic decision-making in Israel.”

Yisrael Beytenu chief Avigdor Liberman speaks at the Herzliya Conference, May 22, 2023. (Avshalom Sassoni/Flash90)

In addition to the NIS 4.9 billion of discretionary funds that Orthodox schools and religious scholars were allocated mid-May, another NIS 1 billion was provided for a food stamp program demanded by Mizrahi ultra-Orthodox party Shas, as well as additional funds for ultra-Orthodox education, building religious buildings, and supporting Haredi Jewish culture and identity.

The combined demands enraged largely secular corners of Israeli society, who criticize state support that enables religious scholars to eschew employment and military service, and that funds private ultra-Orthodox schools, which inadequately prepare children for the workforce because they are not required to teach core subjects, like math, science, and English.

The coalition is seeking to advance the budget and its attendant legislation through their final two votes by Tuesday night, although it has warned its lawmakers to be prepared to extend the process to Wednesday and even possibly next week.

Growing 5% from 2022 to 2023, the budget grows Israel’s deficit at an economically precarious time. The Finance Ministry predicts that state revenues are expected to drop below their initial forecasts, driven both by global market contractions and market uncertainty tied to the government’s plan to constrain judicial power.

Global credit ratings agency have noted concerns, with Moody’s in April degrading Israel’s credit outlook in light of “deterioration of governance,” connected to shaking up the judiciary.

Finance Minister Bezalel Smotrich attends a press conference at the Finance Ministry in Jerusalem on May 14, 2023. (Noam Revkin Fenton/Flash90)

Inflation and cost of living both continue to rise, but despite cost of living being a central campaign promise from Likud and ultra-Orthodox parties, the budget contains no significant measures to combat structural price drivers.

Smotrich has dismissed criticism on failing to address the cost of living, pointing instead to plans to help develop less economically prosperous regions remote from Israel’s financial center. This includes a contentious plan to reshuffle a portion of municipal tax payments from commercially strong, centrally located cities to far-flung areas that lack robust local businesses.

Revealing his discomfort with the size of the planned expenditure, Smotrich has acknowledged that the budget has swollen to accommodate “promises to coalition partners.”

Many of these promises are funded through discretionary funds, which increased from NIS 1.2 billion in 2022 to NIS 13.7 billion for the 2023-2024 budget.