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What happened: In the early hours of this morning, the Knesset passed the 2022 budget, after passing the 2021 budget and arrangements bill yesterday.

• The 2021 budget was approved by a majority of just one, with 61-59 MKs voting in favour. This morning, the 2022 budget was approved by 59 MKs with 56 voting against. The sum of next year’s budget is NIS 452 billion (£108b), while this year’s budget is NIS 432 billion (£103b).
• All coalition partners expressed their joy and relief that the budget passed. Prime Minister Naftali Bennett said after the budget vote yesterday: “This is a day of celebration for the State of Israel. After years of chaos. We formed a government, overcame the Delta variant, and now, thank God, we have passed a budget for Israel. We’ll keep going, full steam ahead.”
• Alternate Prime Minister and Foreign Minister Lapid said: “We took responsibility and kept our promise.”
• Finance Minister Avigdor Lieberman said from the Knesset podium that the “budget brings certainty to Israel,” in reference to the 14 November deadline in which had the budget not been passed by that date, the Knesset would have automatically dissolved and new elections held.
• Mansour Abbas, chair of the United Arab List, noted the historic meaning of approving Israel’s budget: “This good news gives citizens hope. This is the first time that an Arab party plays a central role in passing a budget and establishing a coalition. This is an important step in the process of political integration, the realisation of the right for civic partnership and the taking of collective responsibility for the benefit of all citizens, Arabs and Jews.”
• The Opposition were less than happy over the budget passing. MK Shlomo Karhi (Likud) said: “The government of fraud managed to pass a harmful budget against the weak, against Judaism, and against the state’s Jewish character.” Meanwhile, Shas Chairman Aryeh Deri said: “The government of the self-satisfied passed a bad budget that is entirely a brutal and deliberate blow to the elderly, the weak, the residents of the periphery, and families with lots of children.”

Context: The passing of the 2021 budget ended a period of two years when Israel went without a budget.

• In order to pass both budgets, the Knesset had voted for 35 hours straight over some 800 objections raised by the opposition. In some votes, MKs accidentally voted for the wrong side, including Opposition leader Benjamin Netanyahu who voted with the coalition six times.
• Yesterday, one of the 2022 budget’s clauses, which touches upon the building of classrooms, was struck down and returned to the Finance Committee for discussions, which delayed the vote.
• Foreign Minister Lapid played a key role in keeping the coalition united in the last few weeks. He drove with Mansour Abbas to unrecognised villages in the Negev, met with Abir Kara to discuss unemployment allowances for the self-employed, and worked with Ram Shefa on agricultural reforms.
• Some of the key economic components of the budget include:
  • Removing restrictions to allow municipalities to set up private transportation systems and impose a congestion charge for Tel Aviv in 2024.
  • Investing NIS 8 billion (£1.9bn) in developing transportation, drainage, and sewage infrastructure.
  • Introducing a new housing plan to increase the supply of homes by 280,000 over the next four years and advancing plans for a further 500,000 homes.
  • Expanding digital access to primary care, as well as access to mental health care and services.
  • Increasing the education budget for pupils eligible for special education services, as well as introducing English as a spoken language from kindergarten age and developing advanced technology-focused tracks from the early grades to prepare students for a 21st-century job market.
  • Reforming the agricultural sectors with funding for upgrading farms, infrastructure and new tax breaks to spurs commercial investment.
  • Easing regulation for small and medium-sized businesses to allow easier access to government and foreign investment.
  • Incrementally raising the retirement age for women to 65, as well as decreasing the gender salary gap.
  • Reforming open banking by allowing non-banks to offer services at competitive rates.
  • Lowering the cost of living through the easing of imports with international product standards from the US and EU.

Looking ahead: The passing of the 2022 budget means the earliest an election can be initiated for failing to pass a budget is March 2023. The rotation agreement for Lapid to become prime minister is set to happen in August 2023.

• Also, if elections are initiated for the remainder of Bennett’s term, due to coalition agreements the interim prime minister will be Lapid and not Bennett.
• Netanyahu now faces a stark dilemma, to remain as head of the opposition for at least the next year and a half or accept calls from within the Likud for a leadership contest.