The frantic discussions about the "war budget" or the revised budget for 2024 continued into the night, with each minister fighting for the cuts in his ministry, and everything hurts: the cuts in the basket of medicines, the cuts in the development of the "red roads," the cuts in the programs to fight crime in the Arab sector, the cuts in agriculture these days.
Netanyahu at the start of the Cabinet meeting to approve the state budget for 2024 | Roy Avraham / GPO, Sound: Yehezkel Kandil / GPO
Netanyahu understands that this may be his last budget, and he certainly doesn't want to upset the political partners, so where is there no effort to cut back? True, not in coalition funds and not in closing the unnecessary ministries. The Israeli public understands the magnitude of the hour and would accept all the decrees and taxes – both the mileage tax and the smoking tax and even the VAT increase. The main problem is that the public does not see solidarity from the other side and a personal example from the government – neither closing unnecessary ministries nor significantly cutting coalition funds.
The volume of coalition funds that will be cut in the updated budget for 2024 is only NIS 2.5 billion out of about NIS 8 billion, that is, about 32% of the total coalition funds for this year.
This is in contrast to promises made only recently – to cut 70% of these funds. Moreover, this is only half of the NIS 5 billion recommended by the budget department. And what about closing the unnecessary offices? Although the final decision has not yet been made as of this writing, the direction is already clear. 10 government ministries will certainly not be closed here, and the government will continue to serve with an unreasonable number of ministers, especially during the war.
Bank of Israel Governor Prof. Amir Yaron was very right when he said that the scope is too short, and that the adjustments (or cuts) taken by the government are in the right direction, but not enough. Therefore, the Governor called for a very unpopular step and an increase in VAT by 1% already this year. This is different from what Netanyahu compromised on – raising VAT only in 2025 with an option to cancel in July 2024, in other words to go with (the cuts) and feel without.
Bank of Israel Governor Prof. Amir Yaron, Photo: Oren Ben Hakon
True, raising VAT by 1% is a measure that will mainly hurt poor families, but the government's political needs leave no other choice. You have to bring money from another source. In conclusion, we note that the cabinet meeting began with the government budget deficit ceiling set by law at 6.5 percent, a relatively conservative target given the circumstances.
Of course, this is only a forecast that could worsen if the fighting is more prolonged or intense than planned. It remains only to hope that the Ministry of Finance will not have to increase this ceiling significantly in order to please the government ministers and pass the budget, otherwise the credit rating companies may be worried and it will already cost us dearly.
Wrong? We'll fix it! If you find a mistake in the article, please share with us