Minister of Finance Bezalel Smotrich sent a strongly-worded letter at the weekend to Commissioner of Budgets Yogev Gradus, demanding material changes in the way the 2025 state budget is prepared. "I would ask that you should set much faster timetables than those that you have proposed," Smotrich wrote. He directed that all the proposals and estimates should be presented to him next week.
The Budgets Division in the Ministry of Finance is examining the consequences of Smotrich’s instruction: how far it can be fulfilled, and whether shortening the process will harm staff work on the budget.
Within a few days, Smotrich has managed to clash with the two main divisional heads in his ministry. Last week, he sent a blunt letter to Accountant General Yali Rothenberg, attacking the decision to withdraw the financial controller on behalf of the Ministry of Finance from the haredi (ultra-Orthodox Jewish) education networks. "Someone got confused here," Smotrich wrote, under the heading "In those days there was no king in Israel; everyone did what was right in his own eyes" (Judges 21:25).
The very fact that communications between the minister and his officials take place through letters distributed to the press indicates how shaky relations are within the ministry. Nevertheless, from the pile of ego battles between the minister and the professional level, certain matters of principle worth discussing can be sifted out.
Packing a complex process into a short time span
The 2025 budget will be the fourth that Smotrich will pass, even though he has served only eighteen months as minister of finance. One of the lessons that Smotrich has learned from previous rounds is that the Budgets Division tends to keep its cards too close to its chest, and unveils its final plans to the various government ministries just days before the budget is due to be approved, leaving them insufficient time to prepare responses.
Instead of this, the minister wants the rapid formulation of a bank of possible measures for cutting spending, in order to enable the ministries to prepare for the budget as early as possible, and to give them the right to choose which items to cut. This is in addition to the formulation of a package of taxation measures that the Ministry of Finance will seek to impose on the public in an attempt to balance the budget, such as in vehicle taxation.
The minister’s request that this complicated process should be compressed into such a short period of time may sound unrealistic. But in Smotrich’s view it is certainly possible, since the Budgets Division has most of the required data in any case, and its preference for hanging on to the figures until the last moment mainly stems from a desire to hold on to a means of exercising power.
Not to retain surpluses until the end of the year
Another subject that stands out in the letter relates to the transfer of budget surpluses from one year to the next. Here too, there is longstanding criticism by government ministries, shared by other divisions in the Ministry of Finance, of the Budget Division’s tendency to delay the release of surpluses from one year until towards the end of the following year. Smotrich sees this as an unjustified lever of control in the Budget Division’s hands.
The Budget Division explains the policy by the need to control the rate of spending and to keep reserves in case of an emergency, as was demonstrated for example in the war that broke out in October 2023, when reserves maintained by delaying the transfer of surpluses helped greatly in financing immediate expenditure. Nevertheless, the minister believes that this policy should be changed, and that surpluses should be transferred to ministries by March 2025.
An important tool for keeping the coalition stable
At the moment, Bezalel is not talking about bringing forward approval of the budget, which is due to take place in the government in August, but rather about shortening internal procedures in the ministry. But the budget has been brought forward or postponed for political reasons several times in recent years. Israel Katz, for example, when he was minister of finance in 2020 and 2021, did not pass a state budget, which resulted in the dissolution of the Knesset and the formation of a new government after the election, thus avoiding the transfer of the premiership from Benjamin Netanyahu to Benny Gantz under the rotation agreement between them.
By law, if the government fails to pass the budget through the Knesset, the Knesset is dissolved and elections take place. The budget is an important tool in keeping the coalition stable, and it may be that the politicians wish to pass it as early as they can to remove a possible threat to the government’s survival.
Published by Globes, Israel business news - en.globes.co.il - on June 10, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.