Smotrich loses Treasury power struggle

Bezalel Smotrich and Yogev Gardos  credit: Noam Moskowitz/Knesset Spokesperson, Oded Karny
Bezalel Smotrich and Yogev Gardos credit: Noam Moskowitz/Knesset Spokesperson, Oded Karny

An attempt to override Ministry of Finance professionals, allegedly to maintain funds for haredi parties, seems to have failed.

Senior Ministry of Finance officials turned up to work yesterday amid confusion over who is responsible for the 2024 state budget. This is what happens when the minister of finance decides to upend the division of responsibilities within the ministry. Bezalel Smotrich wanted to strip powers from the Budgets Division, among other things so that it would not prevent him from maintaining the allocations to the haredi parties in the original budget, according to Ministry of Finance sources.

Yogev Gardos, head of the Budgets Division, stood his ground, and on Monday evening the Ministry of Finance’s legal adviser Asi Messing found against Smotrich, and ruled that the decision could not be carried out, as it would turn the posts of budgets commissioner and accountant general into political appointments.

Smotrich, however, has been trying to circumvent the legal opinion. He has refrained from saying explicitly that he will not accept the ruling, but he set on associates to denigrate it. "The State of Israel is at war, and we don’t have time to read sixteen pages of verbiage detached from reality, designed to create bureaucratic impediments and prevent the efficient management of a war budget," they wrote.

In Smotrich’s circle, they are trying to give the impression that they will carry on as planned, that is, to manage the budget through a special team set up by the minister, headed by Ministry of Finance director general Shlomi Heisler, who is supposed to receive powers taken away from ministry professionals, although Heisler himself does not wish to take on these extra powers.

"The team formed at the Ministry of Finance is intended to streamline and shorten processes, and the Ministry of Finance will operate by means of it until the end of the war," Smotrich’s associates said, adding a veiled threat to the ministry’s professional ranks: "The minister of finance does not intend to allow anyone to harm the public and prevent it from receiving the response it needs at this time of war."

No veto

So what will actually happen? Will the team convene to set the budget, giving the last word to Heisler, Smotrich’s personal appointee?

The conclusion from conversations with Ministry of Finance people past and present is that Smotrich lost and the Budgets Division won.

The team, consisting of Heisler, Gardos, and Accountant General Yali Rothenberg, will convene. There is nothing exceptional about that. But it is now clear that Heisler will not have a veto over the division heads, contrary to what Smotrich decided. If they do not reach agreement between themselves, the matter in question will go to the minister to decide, as is normal practice in any case.

In any event, it looks as though the matters that will come before the team will not be broad macro issues in the budget, but rather short-term problems.

It should be mentioned that the hierarchy at the Ministry of Finance is unusual, in that the divisional heads are at the same level as the director general, and not subordinate to him.

In the end, it doesn’t matter whether meetings between senior officials are designated as a "special team" or as routine management meetings. In practice, the preparation of the budget will be in the hands of the entity whose job that is - the Budgets Division.

The realization that Smotrich will be forced into a U-turn is bad news for anyone who hoped that the state would loosen the purse strings and pour out money. Smotrich has recently come out with budgetary decisions without agreement with the ministry professionals, such as expansion of the area in which businesses will be entitled to extra compensation for war damage to 40 kilometers from the Gaza Strip border, or the instruction to freeze interest on deferred loan repayments.

A budget led by the Budgets Division will presumably be tighter and more restrained than one exposed to political motives.

Looking everywhere for budget sources

Even before any reformulation of the 2024 budget, the most acute need at the moment is to deal with soaring expenditure up to the end of the current year.

Senior Ministry of Finance officials estimate that NIS 5-6 billion needs to be found in order to finish the year without breaching statutory spending limits. The ministry has been scratching around everywhere for sources of these funds.

The Ministry of Environmental Protection has had its cleanliness fund taken away. The budget for rehabilitating quarries has also gone, and even the Knesset has contributed NIS 80 million of its budget (without, Heaven forbid, touching Knesset members’ pay).

All this is not enough, and the Ministry of Finance will have to submit changes to the 2023 budget for rapid approval. The battle will mainly be over money allocated to coalition parties, of which NIS 1.5-2.5 billion remains unspent in the current year.

Published by Globes, Israel business news - - on November 8, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Bezalel Smotrich and Yogev Gardos  credit: Noam Moskowitz/Knesset Spokesperson, Oded Karny
Bezalel Smotrich and Yogev Gardos credit: Noam Moskowitz/Knesset Spokesperson, Oded Karny
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