Sources inform ''Globes'' that the Ministry of Finance intends to change expenditure rules, which cap the budget growth from one year to the next. The initiative is emerging following the performance failure of the current rule, which has resulted in the need to cut the 2013 budget by NIS 15 billion.
Under the current expenditure rule, the state budget can grow by 2.7% in real terms (about 5% in nominal terms) per year. However, the current government under Prime Minister Benjamin Netanyahu assumed commitments which have resulted in 9% budget growth; hence the need for budget cuts.
The main change planned by the Ministry of Finance is to create a mechanism that will increase multiyear commitments, which created the budget blowout for the next two years. The change is being made because the ministry has realized that the failure in the present term is due to many multiyear and cumulative commitments made in 2009-10, including salary agreements, and education and defense budget supplements, which cannot be financed in 2013-14 without breaching the spending cap.
The ministry therefore proposes that current commitments with a future budget impact must comply with future spending caps. If a future spending cap is liable to be breached, the government must state the future source of revenues to finance the commitment. In other words, when the government makes a future commitment, it must simultaneously cut the future state budget.
Budget Director Gal Hershkowitz is behind the initiative, which has the support of Ministry of Finance director general Doron Cohen, after the current rule failed to restrain the budget. Accountant General Michal Abadi-Boiangiu, who in early 2012 warned about the structural budget problems, also supports the change.
The writing of the new fiscal rule has caused an argument within the Ministry of Finance over who is responsible for the unfunded commitments made in the past few years. The blame is usually placed on Netanyahu and Minister of Finance Yuval Steinitz, who are aware of the growing problem of the 2013 budget.
Other top Ministry of Finance officials blame Hershkowitz and absolve Netanyahu. "The prime minister is not required to walk around with a calculator in his pocket. It's the job of the Budget Department to stop the commitments," said a source. Most of the commitments were made in 2009-10, when Udi Nissan was the Budget Director. Hershkowitz was appointed in the summer of 2011, in the midst of the Trachtenberg Committee fervor, and served on the committee, where he successfully imposed the principle of not breaching the budget framework.
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2012
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