There are two reasons why the transfer of billions of shekels to the defense budget yesterday by the Knesset Finance Committee should arouse deep concern. One is how the money was transferred: without transparency, providing any reasons, or explanations to the public. The second, which is no less important, is the significance of the ongoing scandal of a substantial mid-year change in the defense budget, which turns the budget into a fiction.
In everything pertaining to the transfer of NIS 3.3 billion to the defense budget, MK Stav Shafir was absolutely right in her criticism of the way the money was transferred. We are entitled to guess that some of the money was set aside to pay for the IDF's activity during the war in the Gaza Strip. A reasonable person, however, should ask himself if there was some kind of deal struck between the Jewish Home party of Finance Committee chairman Nissan Slomiansky and the Ministry of Defense in exchange for expedited and clandestine handling of the transfer of funds. In the absence of reliable information, this suspicion will not vanish from public discussion. Here we come to the second reason why yesterday's measure should make us worry. Like his predecessor, Yuval Steinitz, Minister of Finance Yair Lapid is lending a hand to measures that undermine the effort to devise a credible fiscal policy. Lacking knowledge and experience, both finance ministers brought about a situation in which implementing the budget became a matter of luck, not the result of deliberate policy.
When the budget approved by the Knesset is nothing but a worthless piece of paper in which profound changes can be made in key items during the fiscal year, especially the defense budget, the presentation of the budget by the finance minister and the process of approving it become nothing but a sad farce. The Finance Committee always convenes and repeatedly approves the transfer of billions of shekels in a few minutes without explanations, public debate, and in effect without the public's knowledge. In this situation, the IDF will continue to treat citizens as a money-making machine whenever it pleases, and all the plans on paper to reestablish civilian spending will be nothing more than a fabrication.
As the State Comptroller showed in his report on the 2011 budget, the problem is not confined to spending; it also involves revenues. Year after year, the Finance Ministry prepares a budget on the basis of assumptions that usually do not meet the test of reality. Sometimes revenues are overestimated, as occurred in the budget commented on by the State Comptroller, and sometimes they are underestimated, as occurred in the first half of the current year. It is like a roulette wheel. As early as a decade ago, International Monetary Fund (IMF) economists wrote a report asking the Finance Ministry for greater transparency about its assumptions in preparing the budget. In view of the State Comptroller's report, however, it appears that as with many documents, the IMF report was put away in a drawer, where it disappeared from view and memory.
The preparations for the 2015 budget are going the same way, without knowing how much will be spent and how much revenues will be. Behind the scenes, interplay of egos and interests is taking place. On the one hand, the Ministry of Defense is willing to inflate the cost of the war in order to achieve a better starting point for the horse trading to come. On the other hand, the Finance Minister is unwilling to give up his NIS 3 billion 0% VAT plan for apartment purchases for political reasons, thereby subjecting state revenues to impossible constraints. That is what is left of the budget process that not many years ago still attempted to maintain an appearance of respectability and rationality.
Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2014
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