Israel cabinet passes austerity budget for 2013-14

The Israeli government on Tuesday adopted a deeply unpopular austerity budget for 2013-14 after a marathon overnight session, with the proposal due to be put to a vote in parliament in the coming months.

The budget was passed by 21-1 in the early hours of Tuesday morning after a session which began almost 24 hours earlier.

Defence cuts of 3.0 billion shekels ($840.73 mln/648 mln euros), which were approved by the security cabinet on Monday morning, were 1.0 billion less than the figure proposed by Finance Minister Yair Lapid, and only a fraction of a military bill likely to hit 56 billion shekels ($15 bln/12 bln euros).

According to the budget proposal that was passed, the extra billion shekels will be taken from the budgets of almost every government ministry, except defence and welfare, which will see a 2.0 percent cut this year, and 3.0 percent in 2014.

Corporate tax will be raised by 1.5 percent, instead of 1.0 percent, and income tax will also rise by 1.5 percentage points. There will also be a one-point rise in VAT, hiking it to 18 percent.

Lapid, in office for less than two months, is trying to plug a budget deficit expected to be capped at 4.65 percent of gross domestic product this year and three percent in 2014.

His proposals have already sparked a public outcry, with thousands taking to the streets of Israel's main cities on Saturday to demonstrate in an echo of the mass cost-of-living protests which swept the country in 2011.

But Netanyahu himself has come under fire as reports leaked out that he ordered a double bed installed on a plane flying him to London last month for the funeral of Britain's Margaret Thatcher, at a cost of $127,000 (98,000 euros).

Public anger over the austerity cuts and the so-called "bedgate" affair, was likely to be further fuelled on Tuesday with reports that the expenses of the prime minister's residence rose from 1.89 million shekels in 2009, to 3.29 million in 2012 (from $520,000 to $905,000) -- an increase of nearly 75 percent.

The figures were spelled out in a document submitted to the High Court by Netanyahu's office in response to a petition by the Movement for Quality Government, details of which were published in the top-selling Yediot Aharonot daily.

According to the document, annual food and hosting expenses grew from 214,000 shekels in 2009 to 480,000 in 2012 ($59,000 to $132,000), while cleaning and housekeeping rose from 553,000 shekels to 1.2 million ($152,000 to $330,000).

Two months ago, reports showing the Netanyahu family enjoyed state-funded 10,000-shekel ($2,700) budget for icecream further embarrassed the premier, prompting him to hurriedly cancel it.