Prime Minister Benjamin Netanyahu and Ministry of Finance officials have agreed on the details of the NIS 5.4 billion "large adjustment package" that he will present to the cabinet on Sunday for approval. He will also submit a NIS 3 billion defense plan. The package keeps the budget framework intact.
The proposed deal includes NIS 2.5 billion for the education chapter of the Trajtenberg Committee recommendations, NIS 700 million for other social services, and NIS 2.2 billion for previous commitments, including the doctors and high school teachers labor agreements.
The programs will be financed by a NIS 2.68 billion cut in defense spending, which include NIS 2.1 billion in specific cuts and NIS 580 million in general cuts. Additional sources are a NIS 1.28 billion cut in ministries' budgets, including a NIS 700 million across-the-board cut; and NIS 1.5 billion from the budget's emergency reserve (part of the switch to the biennial budget).
All ministries will face a 4% flat budget cut in their procurements budgets. Certain ministries, including the Ministry of Transport and, most of all, the Ministry of Defense, will face specific additional budget cuts. Since the Brodet report on defense spending was approved, the defense budget has always been exempted from across-the-board budget cuts - until now.
The core of the big adjustment package is based on "efficiencies-receive" criteria, the Ministry of Defense will receive an additional NIS 2.5 billion, provided that it executes five measures. The money includes NIS 500 million brought from the 2013 budget, and an additional NIS 500 million unconditional supplement.
The five measures are to allow officials from the Ministry of Finance's Office of the Accountant General and Department of Wages to audit and oversee salaries and commitments, privatize Israel Military Industries Ltd. (IMI), vacate military bases and turn the land over to the Israel Land Authority for marketing to developers, vacate bandwidth for civilian use, and implement the Goren committee recommendations on eligibility for aid from the Ministry of Defense's rehabilitation branch. The common denominator of the five measures is that they will free up resources or cash, either for use by the Ministry of Defense, or for civilian use.
However, given coalition opposition, it is doubtful if even an iota of the big adjustment package will actually survive.
Published by Globes [online], Israel business news - www.globes-online.com - on January 5, 2012
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