Should Budget Commissioner quit or back down?

Finance Minister Bezalel Smotrich wrote a letter to Budget Commissioner Yogev Gradus, saying: “As long as you do not agree with my economic policy and believe that you are having difficulty implementing it, you are welcome to step down. As long as you continue in your position, you are subordinate to me and will follow my policies and instructions.”

The clash comes after Smotrich demanded that Gradus organize an “off-budget item” to fund compensation for displaced people from the north, while Gradus insists that the 2024 budget has already been set, and that in order to make retroactive changes, other budget items would have to be cut. What happens in the corridors of the ministry when such disagreements arise between the minister and the person in charge of budgets, and how do they affect the work? The minister makes the decisions, but not in this way, former senior officials say.

The public clash between Smotrich and Gradus is highly unusual, although we have seen similar power struggles in recent times. The most recent was between Budget Commissioner Shaul Meridor and Finance Minister Yisrael Katz, which ended with Meridor’s resignation. How will this conflict end this time?

“Disputes between the minister and the commissioner are something that has happened many times in the past,” says Uri Yogev, who served as budget commissioner between 2002 and 2004 when Benjamin Netanyahu was finance minister and who has also held other senior positions in the public sector and is today a businessman. “Basically, there is really no problem here. The one who ultimately decides is the minister, and the one who is responsible for reflecting the professional truth and presenting the professional alternatives, to the cabinet and the public, is responsible. That is the delicate balance here.”

“There are internal procedures for managing disagreements,” says Prof. Udi Nissan, who was budget commissioner between 2009 and 2011 under Finance Minister Yuval Steinitz and is now a lecturer in economics at the Hebrew University of Jerusalem. “It happens that the minister thinks one way, and the commissioner thinks another way, and there are organized procedures for managing differences of opinion. But it is more legitimate to implement the policy dictated by the minister, and if the commissioner thinks that this is a big mistake, he can always resign.”

But Yogev and Nissan agree that the disagreements are legitimate and that the minister should decide, but this is a different story. According to Nissan, “We are in a completely different situation. The minister is not taking the necessary steps. The last discussions on the 2025 budget were in June. The law provides for a legal and orderly process, allowing the budget to be passed by the end of the year. But he avoided that for two months, disappeared and did not do his legal duty. There were no steps and no statements on the 2025 budget, that’s the background.”

Arguments about the limits of measures

The problem, Yogev says, lies not only in the finance minister’s delay in preparing the budget, but also in the type of demands he makes to ministry officials: “When you read the public letters, you can see that the head of the budget department is mostly standing at the gate and warning. What Smotrich wants is for officials to do what the minister says, including appeasing the public. After all, if the minister decides that he wants to increase the state budget for 2024 at the expense of the deficit – let the budget department prepare it, and it will go to the Knesset for three readings. But it is illegal and immoral to demand that the budget department do things, while hiding it from the public.”

On the other hand, Shmuel Slavin, who served as director general of the Finance Ministry and the Welfare Ministry, says: “Most of the Finance Ministry’s leadership today is in opposition to the minister. The entire ministry is not working well, and it is very difficult to work this way. If there is a minister who the officials do not like, they do not take his opinion into account. The current minister, although he is not a professional, is a smart man.”

“The Budget Department has a bag of recommendations that it pulls out of a drawer, and as soon as Smotrich is not ready for them, it takes away a great deal of freedom of action from the department,” Slavin adds. “Even in the Prime Minister’s Office, Prof. Simhon sees unprofessional people in the Budget Department. There is a problematic mix between Smotrich and the Prime Minister’s Office against the Finance Ministry leadership, and it’s a complicated story.” In his opinion, in the event of a fundamental disagreement, “the most natural thing would be to resign,” but nevertheless, he says, “don’t worry, he won’t resign.”

“His right to oppose them all”

In Nissan’s view, “It is clear that the minister’s decision needs to be implemented. But he cannot simply send a letter out of nowhere asking for a bill to be prepared for an additional budget item, instead of holding an organized discussion with senior ministry officials and hearing from the governor of the Bank of Israel. But when that does not happen within a day, he comes out with a letter designed to discredit the professional ranks. And that is the story of the letter.”

The key point in Yogev’s view is transparency in dealing with the public and bureaucracy, not necessarily professional disagreement: “If Smotrich wants to do it right away, let him do it. But he wants a ‘budget item.’ It will be difficult. We are in an open world, there are rating agencies and there is a global market. The price will be more inflation, higher interest paid by the state and economic instability.”

Regarding the possibility of resignation, Yogev insists that “the position of budget commissioner is also, according to the law, the position of gatekeeper, who protects the public from political pressure. His role, among other things, is to be able to withstand such pressure and not resign. The alternative, often, is weaker people, and that is not good for the country or for this government in particular.”

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 22, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.