National Insurance Institute (NII) Director Prof. Shlomo Mor Yosef warned Tuesday against the ramifications of the budget cuts proposed by the Finance Ministry. "More than 40,000 families will be pushed under the poverty line, and many poor families will become poorer," he told Ynet.
"The families below the poverty line barely survive as it is. With the planned cuts in child benefits, the increase in value added tax and the removal of other social services, like dental treatments and subsidized daycare, these families won't survive," he stressed.
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The Finance Ministry staff finalized its proposal for the 2013-2014 economic plan on Monday night, and it will be discussed by the cabinet next Monday. The proposal includes cuts of NIS 6.5 billion (about $1.8 billion) in the government's activity in 2013, and NIS 18 billion ($5 billion) cuts in 2014.
The plan proposes tax hikes which will come into force immediately, and others which will be implemented in the beginning of 2014. The tax hikes are expected to increase the State's income by NIS 4 billion ($1.2 billion) in 2013 and NIS 14 billion ($3.9 billion) in 2014.
Finance Minister Lapid. 'Child benefits are not a haredi invention,' says Mor Yosef (Photo: Gil Yohanan)
According to the proposal, income tax will be raised by 1.5% as of 2014, value added tax will go up by 1% to a level of 18%, corporate tax will increase to 26%, and taxes on cigarettes and alcohol will be raised. Child benefits will be reduced to NIS 140 ($39) a month.
"They are taking from these families repeatedly because the low-income population has no lobby. So you can reduce the child benefits further and further, and it passes," said Mor Yosef.
"In Israel, child benefits are among the lowest in OECD countries (the Organization for Economic Cooperation and Development, which Israel is a member of)," he noted. According to OECD figures, however, Israel's population growth rate and fertility rate are higher than the OECD average.
"When you reach levels of NIS 140 as child benefits, you can just cancel it because it means nothing. Child benefits are not an invention of the haredim; they are the State's way of helping its citizens," the NII director argued.
There is currently a difference in child benefits parents are entitled to according to the child's date of birth. For children born before June 2003 parents receive NIS 175 ($49) for the first child, NIS 263 ($74) for the second child, NIS 295 ($83) for the third child, NIS 459 ($128) for the fourth child, and NIS 389 ($109) for the fifth child and onwards. For children born as of June 2003, parents receive NIS 175 for the first child, NIS 263 for the second, third and fourth child, and NIS 175 for the fifth child and onwards.
According to the new plan, parents will receive NIS 140 for each child, regardless of when they were born. The reduction applies to all children in the country. According to another decision, parents earning over NIS 50,000 ($14,000) a month will not be entitled to any child benefits.
Mor Yosef said that during the budget discussions the institute had suggested adding an additional payment to those receiving income support, but that the proposal has not been accepted so far. "The matter isn't closed, but we have limited influence," he said.
"The Finance Ministry's plan affects a population which barely lives as it is. You can't take these poor people and impose further decrees on them. This isn't a short period issue but a long-term problem."
Yachimovich: Treasury plan 'cruel'
Opposition Chairwoman Shelly Yachimovich slammed the Finance Ministry's plan on Tuesday, describing it as "cruel, betraying the public, and mostly a bitter economic error with not a single piece of good news."
According to Yachimovich, "The hole in the budget was created because no one dared take from the most important sources – the big capital, and because the decrees and the standard of living and the salary erosion badly affected the middle class and the poor and they stopped consuming. (Finance Minister Yair) Lapid is pursuing the same serious mistake, but in an even more brutal and shameless manner."
"The deficit is moving from the government's pocket to the citizen's pocket," Shas Faction Chairman Ariel Atias said in response to the budget cuts. He slammed Lapid as well, saying that "the working person's economic situation will deteriorate thanks to him. Now even Riki Cohen feels Lapid has deceived her."
Sources within the coalition voiced restrained criticism over the expected economic moves. Knesset Member Miri Regev (Likud), chairwoman of the Knesset's Internal Affairs Committee, called on the finance minister to cancel the VAT hike and impose the tax on luxury products only.
MK Ayelet Shaked (Habayit Hayehudi) explained that "the economic decrees are inevitable," accusing the previous government of "mishandling the budget." She added, however, that different decisions could have been made in order to "make things easier for the "reasonable person." She suggested cutting the defense budget and the public sector budget.