Approval of the state budget by the government is almost always a stormy and complex event, but it seems that the 2023-2024 budget broke records for confusion and last minuet changes. Ministers didn’t know what they were voting on, politicians declared achievements written in water, and nearly 72 hours after the budget was approved, it has still not been published in full.
After a night full of shouting and delays, ministers eventually voted in favor of the budget on Friday afternoon. Ministry of Finance officials worked all night on drafting sections of the law, and did not manage to put all the budget documents in order before the sabbath commenced. Only on Sunday did government ministries and the various authorities receive a document setting out all the changes introduced into the Economic Arrangements Bill towards the end of the discussions. The redrafting covers about half of the reforms that the Ministry of Finance sought to introduce alongside the budget itself.
Since the ministers voted on the budget in haste, even before the final agreements were documented, the procedure of approval of the budget in the government has not been completed. A further session of the government may be required to validate the last-minute changes, including the distribution of money to be spent by the coalition parties, which was scattered to the tune of billions of shekels in the final moments of the negotiations so that ministers would consent to vote in favor of the budget.
The battle isn’t over
Some of the reforms were very much weakened, such as the Ministry of Finance’s plan to restrict exclusive food import concessions. The plan that was shelved would have forbidden the large food importers to hold more than one exclusive import franchise from a major food and toiletries supplier, but the importers brought pressure to bear and pointed to legal difficulties. Ironically enough, the Ministry of Finance explained the collapse of the plan by the possible damage to small manufacturers that depend on the distribution services of the major importers, and might have no way of reaching store shelves if the major importers are not allowed to distribute them.
After the budget was approved, the ministers turned to examining who had received larger supplements and who had had to compromise. Although all the ministers voted in favor of approving the budget, apart from Minister of Tourism Haim Katz who was angered by the abolition of the VAT exemption for foreign tourists - the battles are far from over. In the end, the prime minister decided that first there should be a vote and that everything left open would be resolved later, during preparation of the budget in the Knesset.
Framework published late
More than two days passed after the approval of the budget before the Ministry of Finance could even say what the framework was. The legal limit of permitted spending was breached enabling the budget to be increased by NIS 17.7 billion in 2023 and NIS 25.9 billion in 2024. This was still not enough to cover all the expected expenditure and to allow for the expected decline in state revenues.
The government therefore decided to make an across the board spending cut of 3% in 2023, another 3% in 2024, and another 1.5% in 2025. It was also decided to cut jobs in government ministries by 2% and of other government employees by 0.5% in each of these years. The budget for discretionary coalition party spending will be NIS 7 billion in 2024.
Published by Globes, Israel business news - en.globes.co.il - on February 27, 2023.
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