CABINET DECIDES TO CUT 1997 BUDGET
(Communicated by GPO Economics Desk)
Late last night (Sunday), 07.07.96, the Cabinet voted to approve budget
cuts worth NIS 4.9 billion proposed by Finance Minister Dan Meridor and
Prime Minister Benjamin Netanyahu. By a vote of 14 in favor, none against,
and three abstentions (Foreign Minster David Levy, Tourism Minister Moshe
Katzav, and Health Minister Tzahi Hanegbi), the Cabinet passed the
comprehensive plan with its detailed cuts in order to ensure that the 1997
budget deficit does not rise above a level of 2.8% of the country's Gross
Domestic Product.
During the cabinet discussions, and also in statements to the public, both
Finance Minister Meridor and Prime Minister Netanyahu stressed that the
country's weaker strata would not be hurt by the cuts. Finance Ministry
Director-General David Brodet stated, "The budget cuts will not hurt the
weaker elements of the population; most cuts will hit the upper and middle
classes with a very minimal effect on the lower classes."
SECURITY/DEFENSE SECTOR:
The Finance and Defense Ministries reached an agreement according to which
NIS 825 million will be cut from the security budget. The Finance Ministry
originally requested cuts of NIS 1.7 billion from the Defense Ministry. A
majority of the cuts will come from a reduction in pension terms for
career IDF personnel. The Public Security Ministry will cut NIS 145
million from its budget and 400 positions. Also, security organizations
will have NIS 40 million cut from their budgets. Funding programs for
newly discharged soldiers will also be cut, and they will receive a grant
worth 30% of the benefits they currently receive. The IDF Homefront
Command, the defense industries and the Civil Guard will together cut NIS
40 million from their budgets. In addition, the program for renewing and
updating the distribution of gas masks to the general public is being
cancelled to save NIS 120 million; emergency civilian expenditures are
being cut by NIS 60 million.
CHILD ALLOWANCES:
Cuts in child allowances will save the country NIS 850 million. Regarding
the first and second children, families earning more than NIS 7,000
monthly will no longer receive allowances. Families earning between NIS
4,500- 7,000 monthly will have half of the allowance cut, while those
earning less than NIS 4,500 will receive the full allowance. Families with
more than four children will receive the full allowance for each child.
HEALTH:
The Health Ministry will cut NIS 500 million from its budget. Much of this
will come from payments for medical services including visits to doctors,
which will now cost NIS 10 per visit and NIS 20 for a visit to a medical
clinic. Payments for the visits have an upper limit of NIS 50 per month,
while those receiving welfare or living subsidies will pay a smaller fee
and have a smaller upper monthly limit. The Health and Finance Ministries
decided that they will formulate details on how the funds will be
collected within one month.
EDUCATION:
The Education Ministry will cut NIS 400 million from its budget. Plans for
extending the school day have been delayed by five years, while programs
for building more classrooms and climate-controlling classrooms have also
been delayed. Additional instruction hours, occurring from natural growth
in the population, will be cut in 1997-98. Cuts of NIS 40 million will
also occur in higher education.
FINANCE MINISTRY:
The Finance Ministry will cut NIS 12 million from its budget and NIS 280
million from different regular expenditures and from its development
budget.
HOUSING AND CONSTRUCTION:
The Housing and Construction Ministry will cut NIS 259 million from its
budget. The cuts will mostly come from its regular budget, from scaling
back infrastructure replacement in older neighborhoods and improvements in
public institutions, and in other cuts.
INDUSTRY AND TRADE:
The Industry and Trade Ministry will cut NIS 235 million from its budget.
NIS 42 million will be cut from its industrial development budget, NIS 52
million from the Chief Scientist's budget, and NIS 75 million from its
regular budget. The ministry will also cease its venture capital fund for
helping the local movie industry. Changes will also occur in investment
incentives for industry and tourism. Grants to approved projects in
Development Area "A" will be cut from 34% to 20%, while approved projects
in Development Area "B" will be cut from 20% to 10%. Investment grants in
agriculture projects will also be cut.
CANCELLATION OF BENEFITS TO SENIOR CITIZENS:
Cancellation of certain benefits to senior citizens will result in savings
of NIS 160 million. The recently enacted Veteran Citizens Law will be
cancelled. Though discounts in public transportation and medicines will
continue, other discounts such as those in the national television tax and
local property taxes will be cancelled.
BUDGET CUTS IN OTHER MINISTRIES/AUTHORITIES:
Interior Ministry and Local Authorities: NIS 80 million
Public Works Department: NIS 36 million
Foreign Affairs Ministry: NIS 25 million
Religious Affairs Ministry: NIS 25 million
Immigration and Absorption Ministry: NIS 25 million
Agriculture Ministry: NIS 25 million
Water subsidies for agriculture and industrial uses: NIS 3 million
Transportation Ministry: NIS 20 million (the cost of public transportation
will increase by 13% in August 1996)
Communications Ministry: NIS 18 million
Tourism Ministry: NIS 15 million
Science Ministry: NIS 11 million
Prime Minister's Office: NIS 10 million
Justice Ministry: NIS 10 million
Labor and Social Welfare Ministry: NIS 10 million
National Insurance Institute: NIS 5 million
Energy Ministry: NIS 7 million
Israel Lands Authority: NIS 5 million
Environment Ministry: NIS 5 million
Knesset: NIS 2 million
President's Office: NIS 250,000
Budget cuts will also affect employees in all parts of the public sector.
In 1997, the number of employees in the public sector government, local
authorities, and government-owned companies will be reduced by 2%, and
by 1% in each of the following four years. There are currently
approximately 600,000 workers in the public sector.
National lottery winnings over NIS 1,000 will be subject to a 20% tax. The
Free Export Processing Zone planned for the Be'er-Sheva area will be
cancelled, as will be free health care for school pupils and a special
program for new immigrant scientists.