Finance Minister Shimon Peres’ economic austerity program won few friends in either the public or private sectors after its approval by the Cabinet late Thursday. It now faces an uphill fight in the Knesset.
Knesset Laborites accused the plan of favoring the rich over the poor. Industrialists complained it fails to reverse economic stagnation.
Most observers agreed that the public will be paying more for considerably less of the services and entitlements Israelis have become used to.
The chief criticism is that the government again took the easy way out. It opted for new taxes and fees on the public, instead of drastic spending cuts to make up a 1.14 billion shekel ($700 million) revenue shortfall.
Nor, said critics, does the program offer any solutions to the two most urgent problems facing the economy: growing unemployment and the increasing number of business failures.
The Cabinet struggled for 12 hours in extraordinary session Thursday before finally adopting the program, with only two dissenting votes.
They came from opposite ends of the political spectrum. Education Minister Yitzhak Navon, the Labor Party’s No.3 man, and Likud hard-liner Ariel Sharon, the minister of industry and trade, opposed the program for different reasons.
Sharon, the more vocal critic, said it contained no measures to rescue industries in crisis. Not enough is being done to stimulate economic growth by creating investment incentives, Sharon charged in a series of media interview over the weekend.
SCHOOL TAXES, SUBSIDY CUTS
Navon made it clear before the Cabinet session that he would not countenance a program that ended free high school education, which Israelis have always taken for granted.
High school pupils now will have to pay a registration fee ranging from 100 to 800 shekels (up to $500), depending on their family income.
In addition, free education for 3- and 4-year-old children in several development towns will be abolished.
At the other end of the academic scale, university tuition will be raised to $1,726 a year, high by Israeli standards. Funding for yeshiva students will be reduced by 10 million shekels.
Other painful changes are the reduction of maternity grants from 300 to 150 shekels. The one-time grant of 2,700 shekels to soldiers upon completion of military service will be scrapped.
Another break with precedent is the new 4 shekel ($2.50) doctors’ fee every patient must pay out of pocket for a visit to government clinics, even if covered by health insurance.
The measure has raised a loud outcry, but is here to stay unless the Health Ministry finds a way to lop 70 million shekels off its budget.
Subsidies have been eliminated entirely from public transportation and reduced substantially for basic foodstuffs. This means soaring prices at the market and for local travel.
The unemployment situation will be exacerbated by a 3 percent reduction in the size of the public sector work force in one year, impacting 8,000 to 10,000 jobs.
About 1,800 civil service jobs will be affected by a 10 percent cut over two years.
Also planned is a 1 to 3 percent tax on large cars, measured by engine capacity. That presumably will affect the well-to-do.
Peres, who heads the Labor Party, also faces a fight with Histadrut, his major constituency. The trade union federation served notice over the weekend that it will take action unless new wage agreements are signed immediately.
But Defense Minister Yitzhak Rabin has accepted a 120 million shekel cut in the defense budget.
Meanwhile, Peres was embarrassed by the disclosure Friday in the daily newspaper Haaretz that he had allocated 1.2 million shekels ($750,000) to run his ministerial bureau, not including regular salaries and expenses.
His office budget reported by Haaretz includes built-in overtime for key aides, two new limousines for the minister, and cars and drivers for the Deputy Finance Minister Yossi Beilin and Peres’ foreign policy adviser, Nimrod Novik.
Another 100,000 shekels ($62,000) a year are earmarked for a private press-clipping bureau.
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