BICOM

The Israeli cabinet approved on Friday morning the two-year state budget for 2017-18, following an all-night meeting.

The meeting, which began on Thursday afternoon, finally agreed on a budget outline to present to the Knesset after the summer recess.

Prime Minister Benjamin Netanyahu, speaking at the meeting, said the budget contains “the basics for competition, reforms, growth, lowering the cost of living and lessening inequality” while praising it as a low-tax growth budget.

He said: “We must constantly see to it that the fruit increases, to cultivate the tree; therefore, thanks to the growth of our economic tree, tax revenues are coming in which allow the state to finance all its needs – the social services in education, social welfare, health, security and all other fields.”

Mr Netanyahu said businesses don’t invest “if taxes are high; they do this when taxes are low and the result is increased tax receipts”.

Finance Minister Moshe Kahlon said: ‎”We are ending the year with good ratings and with a strong and developing economy.  This is a budget that continues the growth in the social ministries.”

The 2016 fiscal plan called for  reducing the budget deficit from 2.9% to 2% by 2018. The new budget does not include any deficit reduction and will keep to a 2.9% annual target.

According to Yediot Ahronot, Health Minister Yaakov Litzman announced last night that he was opposing the budget in cabinet because it didn’t properly deal with the pressure on the health system. However, Miri Regev’s culture ministry received an NIS 455 million (£92 million) increase, nearly doubling the annual budget of her department.

Bank of Israel Governer Karnit Flug was critical of the budget, saying it cut back on vital education spending but still managed to increase the deficit. Flug has been arguing for a higher-spending, higher-tax, balanced budget.

The new budget still needs to be approved by the Knesset – a process which often takes many months of negotiation and compromise.