2025 budget to include freeze of annual social security benefit increase, Smotrich says

The government intends to cut the 2025 budget by NIS 35 billion, which will be partly funded by a freeze in an expected increase of National Insurance Institute stipends, Finance Minister Bezalel Smotrich said Tuesday.

Increases in salaries of MKs and government officials will also be frozen, he said at a press conference in the Finance Ministry.

NII stipends are normally paired to the Consumer Price Index. In 2025, however, the stipend will remain the same despite the expected rise of the CPI, leading to a nominal cut of an estimated 3% in monthly payments to the weakest citizens, including single parents and Holocaust survivors, Smotrich said.

He presented the “central principles and budget framework,” without elaborating on expected budgets in specific ministries.

The budget would likely be approved by the government by the beginning of October, pass its first reading in the Knesset by mid-November, and become law by the end of December, Smotrich said.

Budget goals for 2025

The budget deficit goal for 2025 would be 4%, compared with 6.6% by the end of 2024, he said.

The budget deficit in the 12 months preceding August was 8.1%, but Smotrich said barring any “major development” in the ongoing war that would increase war spending, the deficit will recede to the goal of 6.6% by the end of the year.

The budget would include a cut of about NIS 35b. to reach the 4% goal of 2025, Smotrich said. The initial budget cuts will be in the public sector, he said, adding that they will apply equally to all government ministries and government-funded bodies such as the NII.

Smotrich cited a number of indicators that the economy has remained strong, including a strengthening of the shekel, compared with the exchange rate at the beginning of the war; the major stock indices are selling at two-year highs; a NIS 23b. increase in tax income, compared with the original forecast for 2024; and the low unemployment rate.

Smotrich said he would continue allocating for civilian expenditures related to the war, including benefits for reservists, rehabilitation of the Gaza border area, and compensation for businesses affected by the war. The budget would have “growth-supporting systemic changes” in the hi-tech sector, public-sector efficiency, and a fight against tax evasion, which based on Israel Tax Authority estimations could provide an additional NIS 100b. in annual income, he said.

In response to a question about coalition funds, which are budget funds earmarked for political agreements, Smotrich said he hoped there would be “as little as possible,” but the determining factor would be whether they are “good funds” or “bad funds.”

When asked why he did not intend to shut down some of the 33 government ministries, based on a proposal by the Finance Ministry’s budget department, Smotrich said many of these ministries had negligible budgets, and their closure would not matter in the big picture.

The coalition agreements signed in late 2022 include a provision that Smotrich will be replaced by Shas chairman Arye Deri at the end of 2024 as finance minister. Deri has since been barred from serving as a minister due to past criminal convictions.

Asked whether he would be replaced by a different member of Shas, Smotrich said while “agreements must be kept,” the coalition agreement could change, and the public should “wait and see.”

At least two members of the coalition voiced their opposition to Smotrich’s plans to freeze the increase in NII stipends. Labor Minister Yoav Ben-Tzur (Shas) wrote: “As the minister responsible for the NII,” freezing the increase was “wrong and immoral."

“There are many solutions to cope with the heavy expenses of the war,” he said, adding that the move would be a “critical blow to hundreds of thousands of families for whom it is their only income.”

The move was also opposed by Knesset Economics Committee chairman David Bitan (Likud).