Cabinet Approves State Budget for 2021-2022

Cabinet ministers on Monday unanimously approved the 2021-2022 state budget, the first fiscal spending package okayed by the government in the past three years.

Due to two years of political stalemate and four elections, Israel has been using a pro-rated version of the 2019 state budget that was passed in March 2018.

The state budget for 2021 will be about NIS 432.5 billion and in 2022 about NIS 452.5 billion. In 2021 the deficit will be 6.8% and in 2022, 3.9%

The Cabinet meeting began on Sunday morning and resumed in the evening following an afternoon break. Shortly after midnight Prime Minister Naftali Bennett convened the heads of the factions in the coalition to agree on the final aspects of the budget.

The most contentious point in the draft appeared to the Health Ministry’s share of the budget, which Health Minister Nitzan Horowitz demanded to be higher than what was offered in the original proposal in the wake of the upcoming ministry’s overhaul he plans to carry out.

Following nighttime discussions, it was agreed the Health Ministry will receive an additional two billion shekels.

On Monday morning, the Health Ministry published the main points of the reform, which include: revamp of the mental health system, increasing the healthcare basket to NIS 600 million, allocation of six additional MRI machines to communities in the periphery, allocation of an additional NIS 500 million for public hospitals, and “immediate” shortening of medical interns’ shifts.

Following the Cabinet’s approval, the budget will now be tabled for the Knesset plenum.

Given the government’s razor-thin majority of just 61 MKs, last-minute challenges to the budget’s passage in the Knesset are likely.

In addition to the increased Health Ministry budget, the new spending plan will, if passed by the Knesset, impose new taxes aimed at slowing the growth of the massive state deficit.

Already larger than the government’s target prior to 2020, the deficit ballooned following the coronavirus lockdowns and bailout grants to citizens and businesses.

Finance Minister Avigdor Liberman said the budget was “a responsible one” and that “the path to approving the budget in the Knesset begins right now and together, while maintaining cooperation. We will pass it in three readings and ensure economic growth and governmental stability for the citizens of the State of Israel.”

While he promised not to raise taxes, he did impose several indirect taxes, including on sweet beverages, disposable dishes and utensils, a congestion fee in Gush Dan starting in 2024, as well as on consumer goods imported from online retailers. Currently, online purchases from abroad have been exempt from Israel’s VAT, so long as the total value of the purchase is below $75.

MK Rabbi Yaakov Litzman (United Torah Judaism) slammed the proposed budget:

“The malicious government has approved a bad budget for the country that will hurt its weaker citizens. This is a budget that is all a social hazard and abuse of those less able.

“After years of maintaining reasonable social policies that included no tax increases, this policy was broken. This is a bad government that has formulated a political budget, ruthless and without hope.

“Unfortunately, the Bennett-Liberman-Lapid-Sa’ar government budget includes stark decrees under the guise of economic reforms, in clear contrast to their promises before the election and while continuing to defraud the public, who are now required to pay the price of the unnecessary ministers and meaningless deputy ministers.

“The budget severely harms the private citizen with a 30% increase in electricity prices, raising property tax rates, raising public transportation prices and harming Rav Kav bus card users, with no solution for the disabled, while severely hurting agriculture, raising housing prices, drinking prices and the price of disposable dishes.

“It is a disgrace that Finance Minister Liberman is acting cruelly while targeting larger families, the chareidi public and the Torah world.

“We will continue to fight this evil government that fights the Jewish character of the State, which violates the values ​​of Judaism and seeks any way to harm the Torah scholars and the religious public.”

Under law, failing to pass a state budget will spell the automatic dissolution of the government, which may plunge Israel into another election campaign.