Minister of Finance Silvan Shalom’s proposal to cut NIS 2.85 billion from the 2001 budget was approved today by a slim majority of 15 ministers, with 11 ministers voting against. Minister of Education Limor Livnat and all of Shas' ministers were among the ministers who voted against the proposal.
The vote was preceded by a flurry of activity at the Prime Minister’s Office, as aides attempted to recruit a majority for the proposal, after difficulties cropped up in the course of the meeting. Prime Minister Ariel Sharon decided that the sweeping 4% cut in ministries’ budgets would be a one-time measure, and would not be included in the base budget, as requested by the Ministry of Finance.
Some ministers demanded a special security levy for financing the cost of anti-Intifada measures, or, alternatively, increasing the deficit by another 0.5-1% of GDP. Sharon and Shalom rejected the suggestions.
Sharon and Shalom warned that imposing additional taxes on the public at this point would push up unemployment and exacerbate the slowdown. As for increasing the budget deficit, Sharon and Shalom said tax revenue was expected to fall by NIS 3-5 billion this year, and that the actual deficit would grow due to the fall in tax revenue, which would not be offset by cuts in government expenditure.
Minister of the Interior and Shas leader Eli Yishai said his party would fight the budget cut proposal at the Knesset. He added that the cabinet had taken a very negative decision that would hurt the disadvantaged segments of the population. “Today’s decision might be the beginning of the end of the Sharon government,” he said.
Published by Israel's Business Arena on 20 May, 2001