Netanyahu convenes 'preliminary' cabinet meeting on high cost of living

Prime Minister Benjamin Netanyahu convened on Tuesday a meeting with Finance Minister Bezalel Smotrich and Agriculture Minister MK Avi Dichter along with professional teams, in what was deemed a "preliminary meeting" ahead of the establishment of a new ministerial committee on the high cost of living, which the prime minister announced on Sunday ahead of the cabinet's weekly meeting that he would form.

According to a statement by the Prime Minister's Office, the sides discussed the "urgent steps" necessary to fight the high cost of living. They decided that Smotrich, along with Economy Minister Nir Barkat, will present steps on "opening the market," cancellation of highly concentrated sectors and reducing regulation, as well as a timetable for their implementation.

While the specifics of the committee's powers and action plan were not disclosed, Netanyahu emphasized on Sunday ahead of the cabinet meeting the importance of economic stability and combating the cost of living. He directed the cabinet secretary to draft a plan for the committee's establishment, to be submitted in the next cabinet meeting, highlighting that this issue is a top priority for the government.

Government's lack of action on the matter

Chairman of the Knesset Economics Committee, Likud MK David Bitan, expressed disappointment with the government's lack of action on the matter, stating during Monday's Economic Committee meeting that, "We gave the Finance Ministry a chance to deal with the cost of living and it didn't happen, so we are free to do what we think."

Bitan expressed concern about the lack of concrete proposals to address problems in the short term, citing the need to fight monopolies and prevent price hikes on controlled dairy products. To address these concerns, Bitan outlined several draft laws to be submitted in the coming weeks. The proposed legislation includes comparing value-added tax (VAT) on food to the OECD average, implementing income tax credit points for individuals with mortgages on first apartments, increasing taxes on banks that fail to provide deposit benefits, and canceling parking price increases in Tel Aviv. 

Opposition leader MK Yair Lapid and a number of other opposition MKs pointed out on Monday in response to Netanyahu's announcement of the new ministerial committee, that such a committee already exists – the statutory Socio-Economic Ministerial Committee, which the prime minister leads, but was not convened since the government's inception in late December.

"You told me once that the way to make sure that something does not advance is to form a committee," Lapid said to Netanyahu, adding that here, too, the prime minister was not taking the issue seriously enough.

Nearly all of the leading economists and industry leaders at the Israel Democracy Institute's annual Eli Hurvitz Conference on Economy and Society on Tuesday also criticized the government, over the economic impacts of its proposed judicial reforms and of the billions of shekel in funding for private haredi school systems that do not teach core secular studies,

Bank of Israel Governor Amir Yaron praised Smotrich's "determinedness" to pass a fiscally-responsible 2023-2024 budget. However, Yaron said that the Israeli economy has experienced a "significant shock" in recent months following the proposed judicial reforms, adding that "continued uncertainty has significant economic costs.”

Regarding the budget, Yaron said that “the budget framework is not overly expansive, it corresponds with the Bank of Israel's goal. However, from the perspective of the budget, it lacks growth generators for both physical and human capital, and it constitutes a negative contribution to growth in the economy."

Yogev Gradus, Director of the Budget Division in the Finance Ministry, added that “the demographic crisis is already here. The direction the education system takes will determine the future of our entire country.” Gradus criticized the funds to the haredi public's private schools, since "improving the level of skills is expected to be one of the engines for raising the standard of living for all of us."

Outgoing Chief Economist at the Finance Ministry, Shira Greenberg, also addressed relatively high gaps in gender-equality in Israel, and warned that haredi men joining the workforce in the future should not lead to the marginalization of women.

"According to the OECD, the State of Israel ranks last in discrimination against women," Greenberg said. "In the State of Israel, not all jobs are open to women. The median salary of women compared to men is in second-to-last place among the OECD countries. When we reach a situation [in 2065] where 50% of first-grade students will be ultra-Orthodox, 50% of them will still be women, and when we talk about integrating ultra-Orthodox in the job market, we must not forget the women as well," Greenberg said.

A disturbance occurred during the conference as well. People in the audience held up signs and heckled Smotrich during his speech on Tuesday morning, shouting "shame" and "democracy," among other calls. Smotrich responded by criticizing the protestors, arguing that they were acting undemocratically by not allowing him to complete his speech.