After two and a half years, state budget passes initial Knesset approval

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The Knesset approved the 2021-22 budget on Thursday in the first of three required votes, marking the first time in two and a half years that a budget has received even preliminary Knesset approval.

The new government thus took a major step forward on one of the major goals for which it was established. The final votes on the budget will be held in November.

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The budget bill, along with the accompanying Economic Arrangements Bill, will now go to committee, where both are likely to undergo further changes. Different portions of the bills will be discussed by different committees.

Coalition members hailed the first passage of the budget. Prime Minister Naftali Bennett called it “A budget that strengthens the defense establishment, the health care system and takes care of the livelihood of Israel’s citizens…rather than political interests. This is another step towards a better, more united, more stable country.

Foreign Minister Yair Lapid echoed that sentiment: “A normal and responsible government held discussions on a normal and responsible budget…one that is not intended for politicians but considers the citizens of the State of Israel.”

Finance Minister Avigdor Lieberman called Thursday “a holiday” and hailed it as “the end of an era of insanity and a return to normal. It is proof that his government functions and that we have returned to routine, as is expected of us.”

For the governing coalition, the main challenge was passage of the Arrangements Bill. But in the end, it was approved by a vote of 59-54, though it underwent major changes over the preceding 24 hours.

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What had initially seemed like the biggest dispute within the coalition – raising the retirement age for women – was solved late Wednesday night, when an agreement was reached between Finance Minister Avigdor Lieberman and treasury officials, on one hand, and MKs Michal Rozin, Efrat Rayten, Naama Lazimi and Ghaida Rinawie Zoabi on the other.

The agreement states that income maintenance payments for women between the former retirement age, 62, and the new one, 65, will be raised by 700 shekels ($218) a month for the next five years. In addition, the budget for a negative income tax will be doubled to enable grants aimed at encouraging women over 62 to keep working. Consequently, the budget for negative income tax payments will rise by 130 million shekels.

The parties also agreed on a plan to remove bureaucratic obstacles to getting the grants, to increase their use by women who need them. From now on, such women will get the payments automatically rather than having to apply.

In addition, 40 million shekels were budgeted for grants to help women who left the job market before age 60 and have exhausted both their unemployment benefits and their right to state-funded professional retraining. Finally, payments to unemployed women aged 57-60 who do undergo professional retraining will be doubled, to 4,000 shekels a month, and they will be able to receive this assistance for longer – up to five months.

In contrast to the retirement age dispute, a dispute over a planned reform of the agriculture sector remained unsolved. Consequently, Agriculture Minister Oded Forer decided to remove it from the Arrangements Bill and to try to pass it separately. The reform was supposed to end production quotas in the poultry industry, modernize the industry and make it more efficient.

This was a sweeping, though possibly temporary, victory for the agriculture lobby and its Knesset representatives, who include Deputy Defense Minister Alon Schuster (Kahol Lavan), MK Ram Shefa (Labor) and the chairman of the Knesset Foreign Affairs and Defense Committee, Ram Ben Barak (Yesh Atid).

Surprisingly, the opponents of excising this reform from the Arrangements Bill included representatives of the fruit and vegetable growers, who fear that it will make Forer and Lieberman less willing to compromise on a planned reform to end tariffs on imported produce.

The final hurdle – which was overcome Thursday evening, thereby allowing the bill to pass – was a dispute over a planned reform to establish a regulatory authority tasked with reducing regulation and bureaucracy. The compromise was to essentially turn this authority into an advisory body, with all the provisions that would have given it teeth being removed from the Arrangements Bill.

Those provisions will be considered separately by the Knesset Constitution Committee. However, any such provision will require the consent of all eight parties in the governing coalition.

The biggest opposition to this reform came from Meretz – Environmental Protection Minister Tamar Zandberg, Health Minister Nitzan Horowitz and MK Mossi Raz. Its biggest supporter, who fought to keep it intact until the last minute, was Abir Kara, a deputy minister in the Prime Minister’s Office.