Finance Minister Bezalel Smotrich sent a strongly worded letter over the weekend to Budget Commissioner Yogev Grados, demanding fundamental changes in the way the state budget for 2025 is prepared. “I would like to ask you to set timelines much faster than those you have proposed,” Smotrich wrote. He directed that all proposals and estimates be presented to him next week.
The Finance Ministry's budget department is studying the consequences of Smotrich's instructions: to what extent they can be implemented, and whether shortening the process would harm staff work on the budget.
Within a few days, Smotrich managed to clash with the heads of the two main departments of his ministry. Last week, he sent a frank letter to Accountant General Eli Rotenberg, attacking the decision to withdraw the comptroller on behalf of the Ministry of Finance from the Haredi (extremist Jewish) education networks. Smotrich wrote under the title: “In those days there was no king in Israel; everyone did what was right in his own eyes” (Judg. 21:25).
The fact that communications between the minister and his officials take place through letters distributed to the press indicates how shaky relations are within the ministry. However, among the pile of ego battles between the minister and the professional level, some matters of principle can be sifted out that are worth discussing.
Mobilization is a complex process in a short period of time
The 2025 budget will be the fourth to be approved by Smotrich, even though he served only eighteen months as Finance Minister. One lesson Smotrich has learned from previous rounds is that the budget department tends to keep its cards very close to its chest, revealing its final plans to various government ministries only days before the budget is scheduled to be approved, and then walking away. Insufficient time to prepare responses.
Instead, the minister wants to quickly formulate a bank of possible measures to reduce spending, to enable ministries to prepare for the budget as soon as possible, and to give them the right to choose which items will be cut. This is in addition to formulating a package of tax measures that the Ministry of Finance will seek to impose on the public in an attempt to balance the budget, as is the case with taxes on vehicles.
The Minister's request to compress such a complex process into such a short period of time may seem unrealistic. But from Smotrich's point of view, this is certainly possible, because the Budgets Division possesses most of the required data in any case, and its preference to hold on to the numbers until the last minute stems mainly from the desire to adhere to the means of exercising authority. .
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Do not keep surpluses until the end of the year
Another topic that emerges in the letter concerns the transfer of budget surpluses from one year to another. Here too, there is long-standing criticism by government ministries, shared by other sections of the Ministry of Finance, of the Budget Department's tendency to delay the release of surpluses from one year until the end of the following year. Smotrich believes that this represents an unjustified control tool in the hands of the budget department.
The Budget Division explains this policy by the necessity of controlling the rate of spending and maintaining reserves in case of emergency, as was demonstrated for example in the war that broke out in October 2023, when maintaining reserves by delaying the transfer of surpluses helped significantly finance direct expenditures. However, the Minister believes that this policy must be changed, and surpluses transferred to ministries by March 2025.
An important tool for maintaining alliance stability
At present, Bezalel is not talking about moving forward the date for approving the budget, which is scheduled to take place in the government in August, but rather about shortening the internal procedures in the ministry. But the budget has been advanced or postponed for political reasons several times in recent years. Yisrael Katz, for example, when he was finance minister in 2020 and 2021, did not pass the state budget, which led to the dissolution of the Knesset and the formation of a new government after the elections, thus avoiding a transfer of the prime ministership. From Benjamin Netanyahu to Benny Gantz, according to the rotation agreement between them.
Under the law, if the government fails to pass the budget through the Knesset, the Knesset is dissolved and elections are held. The budget is an important tool in maintaining coalition stability, and politicians may want to pass it as soon as possible to remove a potential threat to government capacity.
Published by Globes, Israel Business News – en.globes.co.il – on June 10, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.