Taming the defense budget

Financial order will lead to management order, and even military order.

Government officials and members of Knesset are drawing up a series of measures to ensure supervision of the spending of the defense budget. They are demanding that any cash injection or increase in the budget should be made conditional on the adoption upfront of measures to boost supervision and make defense expenditure more transparent.

Recommendations will be voted on by the government and Knesset, in conjunction with the discussions on the additional budget that the defense establishment is now demanding for 2007, currently NIS 19.2 billion. Set out below are some of the key proposals for ensuring supervision and transparency in the NIS 45 billion defense budget (both shekel denominated and US aid). The essence of the proposals is that the defense budget should be split up into several different budgets.

1. The unclassified portion of the defense budget, around NIS 20 billion, is earmarked for salaries, service conditions, pensions and rehabilitation. Such expenses cannot be classed as confidential, secret, or a threat to state security. Were talking about wages (the defense establishment still claims that if details of salaries are disclosed, the public will know how many people are on the payroll and thus, the enemy will know how large the army is).

It is proposed that this unclassified portion of the budget should be treated in the same way as any normal government budget for education, culture, agriculture, and so on. In other words, it must be approved by the Knesset Finance Committee rather than the joint defense budget subcommittee. The members of the Finance Committee are less biased toward defense, are more experienced, have a wider a perspective, and know how to ask complicated questions. This budget and any changes to it will have to be debated and approved by the Finance Committee right down to the last shekel, just like all the budgets of all other government ministries.

Perhaps most significantly, this means that the discussions on this portion of the budget will be more transparent and open to public scrutiny and transparency.

2. The classified portion of the budget - around NIS 23 billion - will remain under the jurisdiction of the joint defense budget subcommittee, and it will be subject to more stringent supervision. In contrast to all other government ministries, which must have prior approval from the Finance Committee for any internal budgetary change or movement of funds from one item to another (an action which requires a notice to the committee, and a vote on every change in excess of NIS 2 million), the defense establishment can spend its budget as it sees fit.

Any budgetary changes of less than NIS 90 million require the filing of a retrospective report only. This means that there is no discussion or debate, merely spilt milk. The committee must be notified in advance of any budgetary changes larger than NIS 90 million, but even in this case, no one makes much of an effort to contest them. The being formulated is to reduce drastically the scope of the permit to make changes and report them retrospectively, and to stipulate that any changes of NIS 10 million and upward will require prior notification to the committee, followed by a discussion and positive approval through a vote by the committees members.

3. A third portion the budget to be separated off, amounting to NIS 2 billion is for the financing of the Ministry of Defense and its related units, comprising 3,000 employees in all. This budget requires reordering and close supervision by the Finance Committee. The IDF and Ministry of Defense budgets have always been treated as one. They call it the defense establishment, although in practice there is all the difference in the world between an office clerk and a combat soldier in Lebanon. This conflation led to absurd situations in which the salaries, terms of employment and terms of retirement of clerks in air conditioned offices were pegged to those who fight on the frontlines in Israels wars.

This is how it worked: After every war, a decision was made to increase salaries and benefits for combat soldiers, and then servicemen in combat support roles. This pay rise was then extended to all army ranks a year or two later, including those with desk jobs in air conditioned offices. After another year or two came the turn of production workers in regular army service, army employed civilians, and of course, Ministry of Defense clerks who had never seen a border in their lives.

As a result, the salaries of Ministry of Defense are double or triple those of their counterparts at other ministries. A junior clerk at the Ministry of Defense earns more than a skilled teacher at the Ministry of Education. The director general earns more than twice the salary of regular ministerial director general. This all takes place under the veil of security. Under the new proposals, the budget of the ministry will be separated from that of the IDF, so as to obtain an accurate of the various expenditure items and bring order to the benefits and employment conditions.

4. Since the days of David Ben Gurion, one particular person has held a dual role: The financial adviser to the IDF Chief of Staff is also the controller of budgets at the Ministry of Defense. Yes, one person fills both of these roles, despite the fact that any reasonable management policy would require military ranks to be answerable to the political leadership. This overlapping of authority, the man with two hats, is a crucial factor in the ministrys fiscal and management problems. At one time the Ministry of Finance led the call to separate these two roles, but in recent years it too has kept silent. Now others are demanding this separation as one of the conditions for approving the increase in the defense budget.

5. A plan is being formulated to bolster government supervision by way of a special ministerial committee on non-military decisions. Until a few years ago, all decisions, large and small, were taken by the IDF and Ministry of Defense, which in effect have common views and interests. Thus, for example, the decision on the procurement of aircraft worth billions of dollars was made internally without it being submitted in an orderly fashion for approval by the government or Knesset.

A few years ago, the government passed a decision which said that every new project or expansion of an existing one would have to be considered by the joint committee. In practice, the IDF makes a long presentation to ministers, including graphs, film clips, and scenarios, following which the politicians are panicked into rubber stamping anything. This has become a farce. The need to introduce order on this is now recognized. The idea is to hold proper discussions, which can even include consultants selected by the government, provided that these are not interested parties.

6.Perhaps after all this is in place, the IDF will also enter the appropriate framework. This is not to say that the public or MKs will hold debates and be briefed on the types of missile being fired, but issues such as conditions of service, size of benefits and the retirement age, will be part of the public debate, since its the public that finances all these expenses. However, in an ideal world, the public could also have a say on whether we need so many aircraft, whether we have to have tanks made in Israel, or whether they can be bought more cheaply, and whether we even need so many tanks. The public can also have a say on whether it is it right that the IDF should manufacture and assemble tanks, and employ large numbers of regular army personnel, NCOs and officers in its factories.

Time to restructure management

The second Lebanon war proved, above all, that the IDF is suffering from a profound management problem. Shortages of water, food, and half empty moldy emergency stores are not the result of a lack of money but of longstanding poor management. Money has never been short. The second Lebanon war was not a military failure. Rather, it was evidence of a multiyear failure in the management of the army and its massive budgets. This army has always benefited from massive unsupervised funding, without transparency, without a guiding hand, and without accountability to anyone.

A huge bowl of cream, the biggest in the country is distributed every year, and the lucky recipients can do whatever they fancy with it. The trouble is that what they fancy is bad for us. The last war was proof, if proof were needed. Even the national security council, which gave us all so much cause for hope when it was founded, has turned into afternoon tea and biscuits at the prime ministers office. It did not deliver what it was supposed to delivers: multidisciplinary supervision of the IDF.

It is time to impose some order, first and foremost financial order, which will lead to management order, and from there to military order.

Published by Globes [online], Israel business news - www.globes.co.il - on August 31, 2006

Copyright of Globes Publisher Itonut (1983) Ltd. 2006

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