New gov't gives up on cutting home prices

The Lapid-Bennett government policy outline limits itself to "moderating the rise in home prices", but there's a bullet train, and rapid expansion of the technology workforce.

The Knesset will meet on Sunday to vote on the State of Israel's 36th government, to be headed by Naftali Bennett. Two days beforehand, the signed coalition agreements will be laid on the table of the Knesset for perusal by Knesset members before the vote takes place.

What can we learn from the draft coalition agreements and the document setting out the new government's main lines of policy that have already been published? They contain many latent problems, partly because some of the agreements cannot be fulfilled and amount to recommendations only, since a "roof agreement" supervenes.

The "roof agreement" that overrides any agreement

Under the draft coalition agreements, the parties that make up the governing coalition will be bound by an agreement signed by Bennett and Yesh Atid leader Yair Lapid that will act as a "roof agreement" attached as an appendix to each agreement between Lapid and the other parties. In effect, everything in the Yamina-Yesh Atid agreement binds all the parties.

At the same time, Yesh Atid's agreements with Yisrael Beitenu, Meretz, Labor, New Hope, Ra'am, and Blue & White do not entail the support of Bennett's Yamina party. In other words, the ability of these parties to realize the provisions of the coalition agreements they have reached is not high, and is dependent on Yamina's consent on every issue.

For example, from the agreement between Yesh Atid and Meretz it emerges that Meretz seeks to avoid unilateral diplomatic moves, and to promote LHTB rights and public transport of Saturdays. None of these matters appears in the roof agreement, however, and so they cannot be advanced unless Yamina agrees.

A further example of the problematic nature of the coalition agreements is to be found in the agreement between Yesh Atid and Gideon Sa'ar's New Hope party, in which the parties undertake to act to divide the roles of the Attorney General between legal adviser to the government and head of the Prosecutor General's department. There is no mention of this in the roof agreement.

Similarly, the Yesh Atid-New Hope agreement mentions a bill to introduce a term limit for the prime minister and a cooling-off period before a prime minister who has reached the limit can again stand for election to the Knesset. The immediate target of these measures is clearly Benjamin Netanyahu, and Yamina has said that it will not back personal legislation.

A budget within 140 days

Under the roof agreement, the state budget for 2021-2022 will be passed within 140 days of the government being voted in by the Knesset. It is also agreed that the Ministry of Digital Affairs, which the outgoing government created for David Amsalem, will be closed, as will the Ministry of Water Resources and Higher Education and the Ministry of Social Equality. The roof agreement also calls for unemployment benefit for the self-employed (at first as a pilot scheme), and reform of the Standards Institution of Israel, to turn it into a regulator, so that as many overseas standards as possible can be accepted without adaptation in Israel.

In addition, Yisrael Beitenu leader and minister of finance-designate Avigdor Liberman is demanding that haredi (ultra-Orthodox Jewish) schools should teach the core curriculum as a condition for state funding. Along with this, Yamina and Yisrael Beitenu have tacitly agreed not to touch budgets for haredi yeshivas. The only understandings reached on religion and state are on giving local city chief rabbis authority on conversion, promoting a military conscription law within 90 days, and appointment of national chief rabbis by consent, probably from the religious Zionist camp..

Ra'am's demands: power struggles and split committees

How will the roof agreement deal with the agreements reached between Bennett and Lapid and Islamic party Ra'am, which contain spending promises amounting to tens of billions of shekels? Despite Lapid's announcement of having succeeded in forming a government that led to a joint photo of the right-wing part of the coalition with Ra'am leader Mansour Abbas, power struggles and tensions between the sides are already emerging. Two of the disagreements delayed signing of the final coalition agreement: those relating to the make-up of the committees dealing with construction and supervision of construction in the Arab sector and the Knesset Internal Affairs and Environment Committee.

The general understandings reached by Bennett and Lapid with Abbas set a budget framework of NIS 50 billion for the Arab population and direct involvement by Abbas in setting targets for the program and oversight of it, all this without him being a government minister.

Those on the right of the coalition, in Yamina and New Hope, demanded that in the realignment of Knesset committees, internal security should be kept out of Abbas's hands. Abbas at first objected, but eventually gave way.

Another disagreement was over the demand for a new committee on housing and construction that would deal with the Arab sector as well. Here Abbass's opposition was more determined. He made clear that since he was not going to be a member of the government and would not be made a minister, his powers in the Knesset should not be curtailed, certainly not over an issue close to his heart.

No ministers? Split the committees

The Lapid-Bennett government in the making is meant to reduce the number of ministers, apparently to 28 (which compares with 38 ministers at the start of the Netanyahu-Gantz government). How will it be done? Under the agreements being formulated the parties will be compensated by means of the chairs of two or three Knesset committees spun off from existing committees and with the creation of new committees. At this stage, the talk is of 25 committees under the new government, which compares with 19 under the outgoing government.

Chairpersons of Knesset committees are entitled to an additional aide, and to a complete staff for the committee: a secretariat, a legal counsel, a committee manager, and more. But the main significance is the power to place matters on the public agenda, and to tighten oversight of the work of the government. Most of the committees, however, will be chaired by members of the coalition parties. The situation therefore will mostly be like that of the Knesset Finance Committee, the chair of which has been given to Yisrael Beitenu, the party of finance minister-to-be Avigdor Liberman, and it's hard to expect very close control by coalition party members of their government.

Infrastructure: Will Israel have a "bullet train"?

The basic policy document of the unity government sets out several expensive, and controversial, infrastructure projects to be given priority. Besides a vague clause stating "rapid and specific transport solutions should be realized", the document says that the new government will advance the construction of two hospitals, in the Negev and the Galilee. The government decided on a new hospital in the Negev in 2014 to relieve the overcrowding at Soroka Hospital in Beersheva, but the matter has been fudged since then. As far as the hospital in the Galilee is concerned, someone apparently did a quick copy-paste of similar past decelerations, and was not informed that the plan for a hospital in the north has been relocated to Kiryat Ata.

Although the document lists a small number of projects, it does mention "construction of a bullet train" - something that Israel Railways knows nothing about and isn't prepared for. Israel's rail infrastructure is suitable for speeds of up to 160 kilometers an hour, and there are only two future sections of track on which speeds will reach 250 kilometers an hour, so it is not clear what the drafters of the document meant.

Housing: What are the chances that home prices will fall?

The policy document states that "the sides agree that we should act with determination to moderate the rise in the price of housing." It is also stated that within 60 days of the government being formed, "the minister of housing and construction will bring before the Israel Land Council a broad and orderly policy decision on affordable housing and urban renewal."

What stands out in the policy document is that whereas previous governments spoke explicitly of bringing prices down, here the goal is only "to moderate the rise in the price of housing".

The technology industry: 15% of the workforce?

According to the basic policy outline of the Lapid-Bennett government, it intends to set a national target for raising the number of workers in technology to 15% of the total workforce by 2026. In 2020, the industry accounted for 9.8% of the workforce, so that, in order to meet the target, Israel's technology industry will need to grow by roughly 180,000 workers over the next five years.

The effect of such growth will be very significant for the Israeli economy, since the pay and productivity of a worker in the technology industry are double the average for the economy as a whole. But the question is whether this goal is realistic, particularly when one takes into account the fact that the proportion of technology workers in Israel's workforce is already the highest in the OECD. What can be said is this is a very high and ambitious goal indeed in comparison with existing projections, but not entirely divorced from reality.

The planned national target is similar to the one published by the Innovation Authority back in 2017. The Authority stated at that time that it was possible to reach half a million workers in innovation-oriented industry within a decade. Since then, the proportion of the Israeli workforce in technology has risen substantially, from 8.3% in 2018 to 9.8%, as mentioned, in 2020. Can Israel's technology continue to grow at that rate, or even faster? It depends whom you ask.

Published by Globes, Israel business news - - on June 9, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

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