The extra civilian price tag: at least NIS 2.5 billion a year
One of the most closely guarded secrets in Israel is the amount of funding that is channeled to the settlements. Budget items were built to conceal this information and no government report has ever been published on the subject. Now, for the first time, Haaretz is presenting a nearly complete picture of the additional cost of the settlements, which totals more than NIS 45 billion since 1967
By Moti
Bassok and Haaretz Staff
In the month between mid-July 2003 and mid-August 2003, during the period of the hudna (cease-fire), information was leaked to the media about non-military investments in the territories of about NIS 800 million. Some of the reports were denied, but experience has shown that this type of denial should be treated with a fair measure of skepticism.
The investments include: NIS 400 million for those willing to live in settlements in the Jordan Valley; the prime minister's approval for paving three roads in the West Bank at a cost of over NIS 150 million (the Keidar-Ma'aleh Adumim road, the Nili-Ofarim road, and the Yabed bypass road); a Housing Ministry decision to provide generous benefits (totaling some NIS 200 million) to those (mostly settlers) purchasing homes in areas designated as National Priority Areas A and B; and income tax breaks of 13 percent for 60 settlements (to be selected by the Defense Ministry).
The arrangement for the tax breaks, which the Finance Ministry negotiated with Minister Avigdor Lieberman, MK Zvi Hendel and others, will cost the state some NIS 100 million in lost tax revenues and provide the recipients of these tax breaks an additional NIS 1,333 in monthly take-home pay.
But aside from all these figures and the huge sums involved, there is still no clear answer to the question of how many extra billions the State of Israel spends in the territories each year. Is it NIS 1 billion? NIS 2 billion? NIS 5 billion? More? In other words, the question is how much less the state would spend if the 231,000 settlers resided within the Green Line. And how much money has Israel allocated for Jewish settlement in the territories since they were conquered over 36 years ago: NIS 20 billion? NIS 30 billion? NIS 50 billion - or more? The Haaretz investigation, conducted during the past three months, attempts to answer these questions for the first time.
Transparent budgets
No prime minister or finance minister, from either the Likud or Labor parties, has ever answered these questions. Most, or all, of them do not know the answers. There is a story at the treasury about a new finance minister, a friend of the settlements, who received the portfolio not that many years ago and invited the head of the Budgets Division for a confidential talk. When the door was closed, the minister implored, "Now tell me, finally, how many billions is the government spending in the territories each year?" The head of the division responded by giving the minister a two-hour lecture on government spending in the territories. During the entire lecture, he did not mention even a single number.
No economic institution, governmental or non-governmental, has made an attempt to answer these questions, with the exception of the Adva Center (Information on Equality and Social Justice in Israel). The research department at the Bank of Israel has never published a study on the economy of the territories. None of the economic conferences, with all of the top movers and shakers in the Israeli economy, has provided answers either. This includes the prestigious Caesarea conference, sponsored by the Israel Democracy Institute. This issue is like a hot potato no one wants to handle.
To put together this report, Haaretz requested information from the Defense Ministry and treasury, the Jewish Agency (which invests a lot of money in the territories, both directly and via the World Zionist Organization), and other governmental and public organizations. All of these bodies are funded by taxpayers and are obliged to provide information to the public. But all of them refused to hand over all or part of the data. This refusal was sometimes explicit and sometimes accompanied by various and peculiar excuses.
Why is it so difficult to find in the treasury's books an answer to the question of how much money is transferred to the territories? The difficulty derives from the fact that the treasury's books do not stipulate which portion of the funds is channeled to the territories. On the contrary, every effort is made to conceal or camouflage these funds. For example, money earmarked for constructing fences in the territories will appear under the "Fences" category and the Defense Ministry will explain that this pertains to fencing for all of the border and periphery communities. The Labor coalition governments of the 1970s initiated this policy of hiding the settlement budgets from the scrutiny of critical Israeli and foreign observers, and the subsequent Likud governments adopted the same policy.
In researching this report, Haaretz reporters spoke with dozens of senior treasury officials and key political and economic leaders, and collected many relevant documents, in an attempt to bring together the complete picture. All of the Haaretz reporters responsible for covering government ministries that fund the settlements gathered information - officially or unofficially - from the top ministry officials.
The Haaretz project was able to draw on some earlier efforts to decipher the issue of government investments in the territories. Peace Now published a study in December 2002 by the economist Dror Tsaban on government budgets channeled to the settlements. In 2001, the Adva Center began to issue information on government investments in the territories (including the Golan Heights) - in local authorities, and on housing and road construction. Haaretz also gleaned information from a pamphlet published by the Accountant General's Division of the Finance Ministry, which summarizes the amount of funding by various government ministries to local authorities - including those in the territories - in 2001. Only a very small number of copies of this pamphlet were distributed, and not every senior treasury official even knows that it exists.
The major budget items: local authorities, housing, roads
Funding for the settlements includes fixed budgets and supplementary allocations, as well as benefits that settlers receive as individuals. The fixed budgets include the sums each locality receives in Israel, plus the extra money the settlements receive. This report only focuses on this surplus funding. Thus, for example, if the average pupil at schools within the Green Line receives five hours of instruction a day and the average child in the territories has a longer school day, Haaretz calculated the additional hours of instruction as an extra cost.
In the case of benefits available to home buyers, the personal benefits derived from family status were not factored into the calculations. Only the benefits that are not offered to families living in central Israel entered into the calculations.
Spending on infrastructure was considered an extra expenditure for three reasons. First, much of the money spent on the settlements - in construction, roads and other infrastructure - is money down the drain because, according to agreements Israel is a party to, this infrastructure will sooner or later be handed over to the Palestinians. Second, there are extra benefits provided for financing infrastructure in the territories that are not offered within the Green Line. Third, the assumption is that most of this infrastructure would not be essential if the settlers were living within the Green Line, even in small communities in peripheral areas.
According to Tsaban's research, the state transferred NIS 2.23 billion to the settlements from non-military budgets in 2001. (He did not calculate military spending related to the settlements.) Of this total, he defines NIS 1.85 billion as surplus costs. Haaretz verified and updated Tsaban's calculations. The main budget items in this extra spending during the past years include: transfers to local authorities (according to the accountant general's report) - about NIS 700 million; Housing Ministry - NIS 440 million (the estimate for 2003 is NIS 500 million); roads - about NIS 400 million. The cost of income tax benefits provided to settlers was about NIS 130 million, though this benefit was canceled this summer. (An arrangement was made, however, to extend and increase this benefit for 60 settlements.)
The Haaretz study found that the state invests about NIS 80 million each year on electricity infrastructure, NIS 50 million on water infrastructure, NIS 40 million on industry and NIS 30 million via the Mifal Hapayis national lottery. In the area of education, the extra funding totals at least NIS 100 million annually and another NIS 75 million in extra costs is incurred in the health system.
The Interior Ministry transferred to local authorities - in addition to the sums cited above - two types of special budgets for the settlements: an Oslo grant (about NIS 35 million per year) and an intifada grant (another NIS 35 million). These sums were significantly reduced this year. Another few million are provided by the Tourism Ministry, Religious Affairs Ministry and Welfare Ministry. In recent years, this has all added up to about NIS 2.25 billion annually in extra costs.
Two significant budget items whose scope is unknown are land acquisition, which has been conducted on a very large scale in the territories, and allocations for many hundreds of non-profit organizations. In 2002, there were no major budget revisions. The economic plan for 2003 brought cutbacks of more than NIS 150 million, but it is still not clear whether they will ultimately be implemented. Thus, a very conservative calculation of extra non-military spending for the settlements in recent years would be NIS 2.5 billion. However, the real figure is apparently much higher.
Haaretz calculated spending on the settlements over the years in two ways, based on existing data and approximate estimates. In both cases, Haaretz based its calculations on current appropriations and the relatively abundant information on past spending. Both methods of calculation led to the conclusion that the amount of extra spending over the years totaled some NIS 50 billion. One of the methods of calculations is shown in the accompanying table. It is based on data showing that the state spent NIS 10.3 billion on housing and NIS 10 billion on roads. The other amounts were calculated according to the number of inhabitants (personal benefits and services) or number of settlements (infrastructure). All together, this works out to more than NIS 45 billion, not including the large, unknown sums spent on acquiring lands and allocations to non-profit organizations.
The second method of calculation is based on the fact that budgets for the settlements during the last 14 years have remained quite constant. There were years when these budgets grew, like during the narrow right-wing government headed by Yitzhak Shamir (1990-92), and there were years in which they shrank, like during the term of the Rabin government. It can be assumed, therefore, that the extra spending in the aforementioned budget areas averaged NIS 2.5 billion a year during 1990-2003 in current shekel values, or NIS 35 billion over these 14 years.
There are only estimates for the 1970s and 1980s, and the Haaretz study was careful to calculate these in a conservative direction. There were fewer Jews living in the territories during the 1980s. According to the number of settlers and settlements, Haaretz estimated that an extra NIS 1 billion was spent each year on the settlements in the 1980s, or NIS 10 billion over the decade. The estimate for the 1970s is NIS 500 million per year, or NIS 5 billion during this 10-year period. This all adds up to NIS 50 billion in extra non-military spending in the territories. It is important to reiterate that Haaretz regards this as a conservative estimate and that the real figure is probably considerably higher.
NIS 4 billion for defense
The extra security expenses in investments and military operations (protecting settlements - including air defense, guarding performed by reserve and regular army units, evacuation of settlers, fortifying settlements, etc.) increased considerably during the past three years of the intifada. It is difficult to isolate the costs of protecting settlements from the rest of the intifada-related expenditures, especially because the defense establishment does its utmost to keep the two types of expenditures secret. One of the difficult problems is to assess which part of the defense array will still need to be deployed after a withdrawal from the territories.
The Haaretz investigation found that the cost of maintaining about 10,000 troops in the territories prior to the intifada was NIS 2 billion per year. Senior officials in the Defense Ministry and other government ministries set the additional cost of the intifada at NIS 2.0-2.5 billion a year. This makes a total of about NIS 4 billion. If peace is achieved, Israel could count on this amount of savings each year in the long run. During the initial years after a withdrawal, the savings would be lower, as much of the intifada-related spending would be transferred to fund security activities along the border.
One possible model for assessing the savings that would result from an IDF pullout from the territories is the IDF withdrawal from Lebanon in June 2000. After the IDF redeployed along the northern border, the Northern Command was able to reduce by 50 percent the number of troops it deploys on this front. Assuming that about half of the defense spending in the territories would be saved after a withdrawal, the extra military-related spending for holding on to the settlements comes to about NIS 2 billion a year.
For example, based on the Lebanon model, it can be estimated that in the event of withdrawal only three or four regional brigades would need to be deployed, instead of the seven now deployed in the West Bank and Gaza Strip. This would enable an armored division to be dismantled. The cost of maintaining an IDF armored division is estimated to be about NIS 1 billion a year.
Practically speaking, however, it is doubtful whether the Lebanon model is applicable to central Israel, and it is only one possible assumption. The savings could be greater than 50 percent in a situation of true peace, or less than this amount in the event of a unilateral withdrawal. In any case, there is no way to unequivocally cite a specific number.
National priority
"Since the beginning of the settlements in the West Bank, Israel has carried out a vigorous and systematic policy aimed at encouraging Israeli citizens to move to the settlements," writes the researcher Yehezkel Lein in a report for the B'Tselem organization. "One of the main tools serving this policy is the granting of benefits and significant financial incentives to settlers. There are two types of incentives - those provided directly to the citizen by defining the settlements as `national priority areas,' and those provided to local authorities in the West Bank under preferred conditions in comparison with localities within Israel."
Up until the beginning of the 1990s, the benefits were provided to the settlements by virtue of their definition as development areas. Yitzhak Shamir's government changed the name to "national priority areas." The revisions made over the years to the list of settlements and scope of the benefits did not significantly change the picture. The settlements, during all of the governments, maintained their status.
The aim of national priority areas (according to the pamphlet "National Priority Areas," Prime Minister's Office, April 26, 1998) is "to encourage the next generation to remain in these areas, to encourage new immigrants to settle there, and also to encourage Israelis to move to the priority areas."
Here again, the same scheme was used that succeeded so well in the state budget: The settlements were bundled in a package of benefits together with border communities in northern Israel and struggling communities in the Negev in an effort to blunt opposition and make it harder to identify and quantify the benefits provided to the settlements.
The benefits and incentives awarded under the framework of national priority areas (according to the National Priority Areas pamphlet) are provided by six government ministries: Housing and Construction, National Infrastructure, Education, Industry and Trade, Labor and Welfare, and the Income Tax Division of the Finance Ministry.
Here are several examples of what it means to be designated National Priority area A. Up until this year, settlers enjoyed a 7 percent deduction in income tax - which translates into an increase in net wages of up to NIS 720 per month - just by virtue of living on the other side of the Green Line. Teachers working in National Priority Area A receive an automatic bonus of four years seniority, an exemption from paying into training funds (keren hishtalmut), an 80-percent housing subsidy, 100-percent reimbursement for travel expenses, and more. Very large grants and loans of about NIS 90,000 are offered to anyone who purchases a home in a settlement. Industrial plants located in National Priority Area A are entitled to larger grants for R&D, up to as much as 60 percent of the cost of each project. n
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