Coalition demands threatening upcoming state budget

The Finance Ministry is set to present its draft of the 2015-16 budget to the cabinet this week. However, several issues remain unresolved and opposition to the proposed budget is expected.

The government must approve the state budget before presenting it to the Knesset. Failure for the Knesset to approve the budget would be considered a vote of no confidence in the government. Although the Knesset began its summer recess last week, it is expected to reconvene during the break to discuss and vote on the budget.

Finance Minister Moshe Kahlon has already made clear some of the provisions he will be suggesting. Child benefits and benefits for the elderly are set to increase and the state is set to significantly increase its spending on public housing. Among the measures to increase revenue, Kahlon will propose restricting tax exemption on pension allowances and that dividends be withdrawn from state companies.

In addition, Kahlon will propose an across the board 3 per cent cut in spending across ministries. However, the defence establishment including Defence Minister Moshe Ya’alon insist that such a cut or restrictions proposed by a recent government-appointed committee will compromise Israel’s military effectiveness.

Meanwhile, Kahlon is also expected to suggest that budgetary promises made by Prime Minister Benjamin Netanyahu to woo coalition partners should be rolled back. Over the weekend, a source close to Shas leader, Economy Minister Aryeh Deri said that a promise of zero VAT on basic household items “must be in the budget … It’s not a matter of whether. It’s a matter of how.” He added that “if Netanyahu’s commitments in the coalition agreements are not kept, the Shas faction will oppose the budget.” Similarly, senior United Torah Judaism leaders have said that they won’t allow Netanyahu “to renege on a pledge … to restore child benefits and subsidies for religious seminaries.”

Meanwhile, Kahlon said that the budget will help bridge the wealth gap, commenting, “Whoever votes against the budget votes against the effort to lower the cost of living.”

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