Should Budget Commissioner quit or back down?

“If you do not sympathize with my economic policies and find them difficult to implement, you are welcome to resign. As long as you remain in your current position, you will be subordinate to me and follow my policies and instructions,” Finance Minister Bezalel Smotrich wrote in a letter to Budget Commissioner Jogev Gradus.

The clash arose after Minister Smotrich asked Gradus to create a “special budget” to cover compensation for North Korean refugees. Gradus, on the other hand, argues that the 2024 budget has already been set and that retroactive changes would require cutting other budget items. With such a conflict between the minister and the budget officer, what happens in the ministry and how does it affect work? Former officials say the minister makes the decisions, but not in this way.

While the public clash between Smotrich and Gradas is highly unusual, we have seen similar power struggles recently, most recently between Budget Commissioner Shor Meridor and Finance Minister Israel Katz, which ended with Meridor’s resignation. How will it end this time?

Ori Yogev, who served as budget commissioner from 2002 to 2004 when Benjamin Netanyahu was finance minister and has also served in other senior public sector positions, and is now a businessman, said: “Disputes between ministers and commissioners have happened many times in the past. And fundamentally, there is really no problem here. It is the minister who ultimately decides, and it is the official whose job it is to reflect the technical truth and present technical alternatives to the cabinet and the public. There is a delicate balance here.”

“There are internal procedures for managing disagreements,” said Udi Nisan, a professor of budget committee under Finance Minister Yuval Steinitz from 2009 to 2011 and now a lecturer in economics at the Hebrew University of Jerusalem. “The minister’s idea may differ from the committee’s idea, and there are organizational procedures for managing disagreements. But it is more legitimate to implement the policy dictated by the minister, and committee members can always resign if they believe they have made a big mistake.”

But Yogev and Nisan agree that while the dispute is legitimate and the minister should decide, this time the story is different. According to Nisan, “We are in a totally different situation. The minister has not done the necessary procedures. The last debate on the 2025 budget was in June. The law provides for a lawful and orderly procedure that would allow the budget to be passed by the end of the year. But the minister has avoided it for two months, disappeared and has not fulfilled his legal obligations. There is no procedure and no data on the 2025 budget. That’s the background.”

Debate over the limits of countermeasures

Yogev said the problem is not just the finance minister’s delays in preparing the budget, but also the demands he makes of ministry officials: “When you read the open letter, it’s almost like the head of the budget is standing at the door warning people. What Smotrich wants is for the officials to do what the minister says, including appeasing public discontent. After all, if the minister decides he wants to increase the 2024 state budget at the expense of the deficit, he will have the budget office prepare the budget and have it debated three times by the Knesset. But making demands on the budget office and hiding them from the public is illegal and unethical.”

Meanwhile, Shmuel Slavin, who served as head of the Ministry of Finance and the Ministry of Welfare, said, “Currently, most of the Ministry’s senior officials are opposed to the minister. The whole ministry is not functioning well, and it is very difficult to work in such conditions. If there is a minister that the employees do not like, their opinion is not taken into account. The current minister is not an expert, but he is a smart person.”

Slavin added: “The Budget Office has a bag of proposals to pull out of the drawer, and as soon as Smotrich is not ready, it takes away a lot of freedom of action from the Budget Office. Even in the Prime Minister’s Office, Professor Simhon sees unprofessional personnel in the Budget Office. There is the issue of Smotrich and the Prime Minister’s Office clashing with the finance ministry leadership, and it’s a complicated story.” In his opinion, in the case of such a fundamental lack of agreement, “the most natural thing would be to resign,” but added: “There’s no need to worry, he won’t resign.”

“The right to oppose all of that.

“It is clear that the minister’s decisions must be implemented, but instead of having an orderly discussion with senior ministry officials and listening to the Bank of Israel governor, the minister cannot just send a letter out of the blue demanding that they ‘prepare a bill for additional budget items,'” Nisan said. “But if this is not done within a day, the minister will send out a letter designed to discredit the professional class. That’s the story of the letter.”

The crux of Yogev’s opinion is transparency towards the public and bureaucrats, not necessarily technocratic debate: “If Smotrich wants to improvise, let him. But he wants a ‘budget item’. It will be difficult. We live in an open world, with rating agencies and global markets. The price will be more inflation, higher interest payments for the state and economic instability.”

Regarding the possibility of his resignation, Yogev stressed, “The position of Budget Commissioner is, by law, also a gatekeeper position that protects the people from political pressure. His role is, among other things, to withstand such pressure and not resign. Instead, in many cases, the people become weaker, which is not good for the country or for this government.”

Published by Globes (en.globes.co.il), an Israeli business news site, on August 22, 2024.

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