Sources inform ''Globes'' that the defense budget, the largest item in the state budget, has been reopened, after officials from the Ministry of Finance and Ministry of Defense sparred over the defense cut in the next budget.
"The plan for the next 18 months does not add up," said Minister of Defense Moshe Ya'alon today. "I agreed that the defense establishment would share in the cuts, because we must share in the burden, but from the beginning, we spoke about a NIS 3 billion cut. Now there is talk about a NIS 7 billion cut over the next 18 months. This is risk-taking which cannot go on," he said.
The dispute stems from how the defense budget is looked at.
A Ministry of Defense source said that defense budget has fallen by NIS 7 billion from NIS 29 billion to NIS 22 billion, as a result of "uncontrollable" changes, including compensation to newly laid off employees, the increase in pensioners, and higher arnona (local property tax) and electricity rates.
Ya'alon said that he was prepared to absorb NIS 3 billion of this erosion, but that he was being asked to absorb an additional NIS 4 billion.
The Ministry of Defense also claims that any reduction in the fixed expenses part of the budget, including salaries, pensions, and rehabilitation, must come at the expense of training and weapons procurement needed to strengthen the IDF.
The Ministry of Finance rejects this approach out of hand, saying that there is no "fixed expenses" budget. "There will be no choice but to cut pay, pension benefits, and rehabilitation," said a top ministry official. "It's unacceptable that the chief of staff can grant a 6% pension hike in past three years for career personnel, but cannot cut when there is no money. This explanation that it's impossible to reduce pensions of IDF retirees, but it's possible to harm Israel's security is utterly unacceptable."
The Ministry of Finance adds that the proportion of the IDF's salaries, pensions, and rehabilitation has only increased in the past 20 years, reaching 65% of the defense budget. It says that the proportion will continue to rise in the coming years, which is why there is no choice but to reduce it.
In plain English, the Ministry of Finance is demanding that the Ministry of Defense avoid making further cuts in preparedness and to focus on cutting salaries, pensions, and rehabilitation. But political-strategic factors enter the picture at this point. "We don’t want to force the Ministry of Defense to make these cuts. This should come to the ministry," said the top Ministry of Finance official.
Sources report that Minister of Finance Yair Lapid has instructed ministry officials to avoid commenting on IDF salary and pension cuts, and to let things roll on without "noise".
The conceptual dispute between the Ministry of Defense and the Ministry of Finance is nothing new, but is repeated every year. The bone of contention is whether the defense budget is calculated in constant terms (how much the budget can buy), or in nominal terms.
Meanwhile the Joint Knesset Committee on the Defense Budget, chaired by MK Avigdor Liberman (Likud-Beitenu), has approved without reservations the NIS 52.5 billion defense budget for 2013. It also approved a NIS 51 billion budget framework, but not the budget plan, for 2014. The reason is simple: without approval of the budget framework, it is impossible to approve the state budget, and that would force new elections. Approval of the full budget (the framework and plan) for 2013 allows the Ministry of Defense to begin contracting with suppliers for the current fiscal year, but in the absence of a budget plan for 2014, it cannot sign contracts for next year.
Ya'alon promised to return to the cabinet in 45 days with a detailed work plan for 2014, so that it will be possible to approve the full budget. "The Ministry of Defense must understand that if by November 1, 2013, it does not fill the gaps which emerged in the budget debate for 2014, we will not approve any budget transfers sent to us. The rules of the game will change," said Liberman, in giving the Ministry of Defense and the Ministry of Finance some breathing room. In the end, Prime Minister Benjamin Netanyahu will have to decide.
Published by Globes [online], Israel business news - www.globes-online.com - on July 23, 2013
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