The cabinet on Wednesday, 20 Menachem Av, voted to approve the 2015-2016 state budget. After reaching an understanding with Finance Minister Moshe Kahlon, Shas ministers who signaled they would not vote for the budget did just that, raising their hands in support of the proposed budget.

Shas ministers signaled that they would not back the state budget, but later indicated an “understanding” was reached. Ultimately, Economy Minister Aryeh Deri and Minister of Religious Services David Azoulai did attend the special cabinet meeting and they did vote for the budget. The meeting lasted for over 12 hours, and during the predawn hours 20 ministers voted for the budget while one abstained.

Defense Minister Moshe Ya’alon abstained because it appears the prime minister is accepting the position of Finance Minister Moshe Kahlon, which includes addition drastic cuts in the defense budget. Kahlon set the defense budget at NIS 55.3 billion for next year with a condition of NIS 59 billion if the Locker Commission recommendations are accepted by the cabinet.

Agreement was not only reached with Shas ministers, but with Bayit Yehudi leader Education Minister Naftali Bennett, whose ministry will deal with a NIS 290 million cut in funding.

The state budget for the year stands at NIS 329.5 billion but the official Knesset approval may not be until the end of 2015. The budget for 2016 stands at NIS 343.3 billion with a deficit target of 2.9% of the GDP. This represents an increase of NIS 14 billion in 2016 and NIS 10 billion for the current year.

Following are Prime Minister Netanyahu’s and Finance Minister Kahlon’s remarks made at the start of the special cabinet meeting on the state budget:

Prime Minister Netanyahu

“The budget that we are submitting today, along with its accompanying items, is a balanced and responsible budget. First of all, this is a budget designed to continue the economic growth in the State of Israel. Dividing up the pie is important, but much less so than enlarging it, because the pieces that go to each citizen will be much bigger if the pie is enlarged. Therefore, all the talk about dividing up the pie and not about making it bigger is out of place.

We are interested in continued growth. This is what makes the Israeli economy unique, at least the economies that I have overseen; this is also what guides us today. We must continue growth. Therefore, the level of taxation will remain low, or at least it will not increase, because we know that the money goes to the people, into their pockets and they will make much better use of it than government officials. Thus I have a very clear view, different than that of many, but it is a correct view and it advances economic growth in the State of Israel – a budget for growth.

The second thing here is reforms that lower the cost of living for Israeli citizens. In parallel with our desire that more money go into people’s pockets, we want them to spend less money on the various services that the state provides or oversees. For example, in the food sector there is not enough competition. Because of this prices here are very high. We are increasing competition in the food sector. We are enacting changes here the likes of which have not been seen in years. I have worked on them over the years and I am pleased that in cooperation with the Economy Minister and the Finance Minister we are now enacting very important far-reaching changes – to lower prices of food, transportation and health.

I thank the ministers and deputy ministers that have shared in this effort, and in many other fields, to lower expenditures, i.e. to put more money into people’s pockets and that they should spend less on the products and services that they buy with it. As a result of these changes, every family will save hundreds of shekels per month. This is significant. We are not just talking, we are doing.

A very great effort that has been made in this budget and in the Arrangements Law is the effort to increase the supply of apartments. The Finance Minister has been leading this, with my complete backing, and the Cabinet will give its complete backing to this important endeavor because this, in the end, can change the trend in housing prices.

I would like to say something about security. This budget must, in the end, strike a balance between the country’s security needs and all of its other needs. I put it this way – all of the country’s other needs versus security – because security ensures that we will have other needs. Without security there is nothing. We know that this is always a hard balance. This is an important dilemma. It has become more important due to the many great and changing security challenges facing the State of Israel; naturally, this also requires an appropriate security budget.

I received two proposals on how to deal with the size and composition of the budget. In recent weeks we have been studying these two proposals. Of course, we will learn lessons from both. We will also combine them and then link between them regarding the changes that we want to make in the security budget, including its increase beyond what is being proposed here. I say in advance. I want all ministers to be familiar with the process that we are going to undertake. We need to provide security alongside meeting the other needs in the State of Israel.

What we will do here today is a continuation of the balanced and successful policy that we have led in recent years. The State of Israel has not fallen into the holes that other economies have fallen into, including Western economies both nearby and far away; we have continued growth. Our obligation is to try and bring about growth of approximately 4%. When growth is around 4% and not 3.5% — we will be on a very, very healthy track for the State of Israel.

This will also be done by other means – opening major markets in Asia, Latin America and other places; and moving forward with new products, especially cyber – but it will also be done by the things that we will decide on today. Our goal is to reach 4% growth, if not this year then certainly next year. Less than this will not suffice and we need to do our utmost in order to achieve this with low taxation. This is the essence of what we want to do with this budget.”

Finance Minister Kahlon

“Mr. Prime Minister, ministers – today we present, as the Prime Minister said, a responsible and balanced budget. The [Finance Ministry] Budget Division has been working with the ministries for months in order to reach agreement.

There is a very significant increase here in civil expenditures. There is very nice expansion here in education from 14-16, approximately NIS 4 billion. There is very nice expansion here in health. There is expansion here in public security. There is major, good and necessary expansion on all other civil matters. As the Prime Minister said, there are benefits that make things easier for people vis-à-vis the cost of living, housing supply, growth, investments, the periphery; we are dealing with all these areas, including infrastructures and bringing the periphery closer to the center, which will generate significant growth.

There are major reforms here the likes of which have not been seen for years, reforms that need a lot of courage and your support, Mr. Prime Minister and my fellow ministers, in order to implement them. It is not for nothing that they have not been done for very many years. We have very significant reforms in the financial market that people did not want to deal with – but we are dealing with it. The financial market is a monopolistic market that requires reforms and changes. There has been major pressure on us not to enact them, but we will enact them and in many other areas as well – the cost of living, food; we mean to do it.

A word about security. Security is dear to us. The IDF is dear to us. We will help and support lest there be the impression – Heaven forbid! – that security is a side issue. Security is in the center. There must be balances between society’s needs and those of security and I am certain that together with the Defense Minister and the Prime Minister, and the other ministers, we will reach a solution. There must not be the impression – Heaven forbid! – that security is a side issue; security is in the center.”

(YWN – Israel Desk, Jerusalem)