Defense Ministry streamlining has failed

With the 2013 defense budget about to be decided, "Globes" finds that the multiyear budget streamlining plan for the IDF has failed.

The fate of the 2013 defense budget will be decided on Wednesday, and the decision will basically decide the fate of the state budget as a whole. Prime Minister Benjamin Netanyahu and his team are due to meet with top Ministry of Finance and Ministry of Defense officials to decide on the defense budget's size - one of the toughest fiscal issues of the day, given the need to cut the state budget by at least NIS 12 billion.

At the center of the debate on the defense budget is the Brodet multiyear budget plan, which is now marking its midpoint. An analysis by "Globes" finds that this plan, which is supposed to provide the IDF with a multiyear horizon for budget planning and streamlining, has failed. An analysis of Bank of Israel (an objective agency) figures has found that the Ministry of Defense, under Minister of Defense Ehud Barak received a gross budget supplement of almost NIS 13 billion (in allocations after approval of the state budget, US military aid, and income-contingent spending) - NIS 4 billion more than the Brodet Committee set. If the defense establishment's "compensation" for the 2006 Second Lebanon War, received in 2008, is added in, the supplement increases to NIS 15.5 billion, and the excess rises to NIS 6.5 billion.

While the Ministry of Defense has received its budget supplements, the country is still waiting for its streamlining. Under the Brodet multiyear plan, the ministry was supposed to streamline by NIS 10 billion - the streamlining target for the first five years from cuts.

There is a disagreement between the Ministry of Finance and the Ministry of Defense over the streamlining: the former estimates the actual streamlining at somewhere between zero and NIS 800 million; the Ministry of Defense estimates that it has exceeded NIS 1 billion. In either case, the actual streamlining is no more than just a tenth of what it was supposed to be.

This is why the Ministry of Finance says that the IDF's lack of streamlining, which has totaled NIS 9 billion to date, is in practice being financed by budget supplements. The ministry says that the money going to the IDF is at the expense of health, education, and welfare.

The figure also explains the constant tension between the Ministry of Finance and the Ministry of Defense: the Ministry of Defense says that the Ministry of Finance has allocated the full NIS 23 billion under the Brodet plan, while the Ministry of Finance says that the IDF has not begun to streamline, and that there is no way to fund such huge budget supplements.

The Brodet plan also called for reductions in defense personnel, its biggest current budget cost, and to fire 2% of regular officers and NCOs a year over ten years. Although no such reduction has been made to date, sources inform ''Globes'' that the Ministry of Defense is planning to fire 5% of regular officers and NCOs, several hundred men and women, if not thousands (the actual figure is classified).

The layoffs will affect non-combat personnel. These staff, who are expensive as they qualify for a pension. While this counts as progress, it is less than half the target set by the Brodet plan. In addition, for the first time, the Ministry of Defense has allowed consultancy firm McKinsey & Co., which has advised the ministry for years on the streamlining, to review the issue of personnel.

The defense budget totals NIS 50.8 billion in 2012, and NIS 55.8 billion including US military aid and income-dependent spending. Under agreements, the Ministry of Finance will allocate an additional NIS 4 billion as part of the Brodet multiyear plan, bringing the total to nearly NIS 60 billion.

It should be remembered that the Trajtenberg Committee recommends cutting the defense budget by NIS 3 billion to finance additional spending on education and welfare; in other words, reducing the defense budget to NIS 47.5 billion and a gross budget of NIS 52.8 billion.

Ahead of Wednesday's discussion, and especially for the day after, the basic questions are, what will be considered a "cut" and what will be considered a "supplement", and using what baseline - before Brodet or after Brodet?

The Ministry of Defense has already said that any figure less than NIS 60 billion will be considered a cut in the gross defense budget. The Ministry of Finance says that it is possible to talk about a gross defense budget of less than NIS 56 billion. The Ministry of Finance's obvious goal is to retroactively implement the Trajtenberg Committee intention, which never became and actual recommendation to cut the defense budget by NIS 3 billion to a gross budget of up to NIS 53 billion.

Prime Minister Benjamin Netanyahu, who yesterday told the cabinet that all threats against Israel's home front are dwarfed by a nuclear Iran, will make the final decision.

The Ministry of Finance declined to comment on the report.

The Ministry of Defense said, "At the order of the defense minister and ministry director general, we do not intend to discuss these or any other numbers, because we hold that this discussion is first about the missions of the defense system and the weapons systems and personnel needed to carry out these missions, as will be decided by the government. Anyone who tries to take this discussion into the realm of numbers makes the discussion superficial and irresponsible. The claims made are incorrect, superficial, provide only a partial picture, and are based on partial and selective quotes from different reports and taken out of context of these reports."

Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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