Last night, Ministry of Finance Budgets Commissioner Ram Belinkov sent government ministers a list of proposals for cutting the state budget. According to the budget framework for 2009-2010, government spending needs to be reduced by NIS 14 billion.
The Ministry of Finance proposes to make the cuts in two main areas: defense, and welfare. In addition, the traditional proposal for an across the board cut appears, put at 2% (NIS 500 million).
Belinkov stressed in his memorandum that the list was subject to agreements with the Histadrut (General Federation lf Labor in Israel), and the employers. This means that if Histadrut chairman Ofer Eini agrees to a cut in public sector salaries or to abolition of the tax exemption on advanced training funds, which are basically savings programs, there will be no need to implement all the proposed cuts.
The proposed reduction in the defense budge amounts to NIS 3 billion. It include, as first reported in "Globes", raising the retirement age, less favorable conditions for career personnel who retire before age 50, a reduction in benefits for career personnel, abolition of posts for IDF representatives overseas, lower vehicle expenses for career personnel, and a NIS 500 million cut in the base salary budget for Ministry of Defense employees from 2010.
The Ministry of Finance also proposes to cut the prime minister's budget for special projects by NIS 120 million. The ministry again proposes that extending the negative income tax nationwide should be conditional on an nationwide expansion of the welfare-to-work program, and seeks tuition hikes for law, accounting, and business administration students.
The list of welfare cuts show that the Ministry of Finance officials are determined, as in the past, that cuts should be made in the defense budget, because it appears impossible to obtain the support of any minister for them. They include a NIS 400 million cut in maternity leave pay; freezing National Insurance payments for alimony, handicaps, and Holocaust reparations, which will save NIS 320 million; a 10% cut in the children's allowance, saving NIS 525 million; a NIS 70 million cut in the budget for children at risk programs; and a NIS 110 million cut in death grants.
The Ministry of Finance proposes cutting maternity leave pay to 80% of a woman's base salary, up to a maximum the base salary time three and divided by 30 workdays, i.e. NIS 778 a day.
The Ministry of Finance wants to reduce the workforce at the Ministry of Health and use the freed funds to deal with swine flu. The Ministry of Finance also proposes a NIS 50 day charge per day of hospitalization.
The Ministry of Finance proposes cutting incentives for working women, such as eliminating the half credit point for income tax, although it proposes awarding a full credit for working mothers with children under the age of eight.
The Ministry of Finance proposes reducing housing aid for new immigrants and other benefits.
Belnikov told “IDF Radio" (Galei Zahal) today, "Some reports in the media are wrong. The education budget is set to grow. To claim that this budget will be cut is simply not true. There is a list of cabinet decisions that exceed the spending cap, and this has to be adjusted. People won't feel this. We don’t want to cut a penny."
Belnikov added, "This is a list approved by the prime minister and finance minister on the basis of professional recommendations. The children's allowance will grow, we propose limiting the increase, and I think that this is line with coalition agreements."
MK Sheli Yacimovich (Labor) said that the list of proposed budget cuts was "cruel and fantastical".
Published by Globes [online], Israel business news - www.globes.co.il - on May 7, 2009
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