Knesset Finance Committee begins debate over renewed budget

The Knesset Finance Committee began on Monday to debate the government proposal for a renewed 2024 budget, with Finance Minister Bezalel Smotrich in attendance.

The original 2024 budget, which passed in May 2023, became irrelevant due to an increase in government spending and a decrease in income in the wake of Israel’s war against Hamas, and Israeli law required that the government bring a renewed budget. The renewed budget passed its first reading on the Knesset floor on Wednesday, and the finance committee’s meeting kicked off a series of debates and then voting ahead of the budget’s return to final voting on the Knesset.

Smotrich presented the budget and said that it was based on three principles: providing all of Israel’s war needs; cutting into budgets that are not necessary for the war needs; and the third was to try to balance the needs of all sectors so as to avoid divisive feuding.

“We are cutting [budgets] but not slaughtering any sacred cows. There will be those who shout over the HaBima [Theater], and those who shout about funds for settlements. There is no budget cut for unimportant things – everything is important, but there are more important things, and these require difficult cuts which every sector and ministry feels. I tried for it to be balanced,” Smotrich said.

Committee members, mostly from the opposition, voiced concerns over the budget, especially in the wake of the credit rating agency Moody’s decision on Friday to lower Israel’s rating for the first time, and to update Israel’s economic outlook to “negative.”

Calls for Smotrich to resign

The leader of the opposition in the committee, Yesh Atid MK Vladimir Beliak, said that Smotrich should resign, saying that he “could not trust” the finance minister’s policy.

“It was you who received a growing economy and within one year turned it into an economy in deficit, you who harmed Israel’s hi-tech industry, and you who said in July 2023 that Moody’s warnings were a ‘temporary response,’ and here the dust has settled and for the first time Israel’s credit rating has fallen, and it is all on your watch,” Beliak said.

Beliak noted that in December Smotrich pledged that the country’s budget deficit would not dip below 5%, but the new budget has it falling to 6.6% by the end of 2024.

“On the 129th day of the war, we no longer have the luxury to continue with you in your job, you failed, you need to resign, and then maybe, in true unity, take Israel out of its current situation,” Beliak said.

The speakers after Beliak criticized different aspects of the budget. These included the fact that the budget did not heed a proposal by finance ministry specialists to shut down six government ministries considered unessential to the war; and that the budget still includes billions of shekels of politically-based “coalition funds,” a large portion of which is earmarked for haredi schools that do not teach core secular studies; the fact that haredi men will continue to receive an exemption from IDF service; significant cuts in funding for long-term projects to develop the Israeli-Arab sector; and more.

Israeli law requires that the budget pass by February 19, but this is highly unlikely, as the Knesset has the right to debate it for 30 days. This means that on February 19 there will be an automatic budget cut of approximately 5% to all government ministries and statutory bodies to make up for the nearly NIS 70-billion-shekel deficit. According to a finance ministry spokesperson, beginning on February 19 and until the new budget is passed into law, ministries will not be able to conduct any new transactions, and this could lead to a de facto shutdown of many ministries.

The Yesh Atid opposition party initiated on Monday a Knesset plenum debate over the budget. The debate is known as a “40 signatory debate” since at least 40 Knesset members need to demand it. The debate itself requires that both the prime minister and head of opposition attend, and includes short, often tense exchanges between members of the coalition and opposition. However, the party announced later on Monday that it was postponing the debate due to elation over the overnight rescue of two Hamas-held hostages, and the loss of two IDF soldiers.