Legislative rush reprieves deserters, omits economic reforms

Deals with the haredi parties to pass bills on the attorney general and the media in the Knesset's last week leave important economic legislation by the wayside.

The last week of business in the Knesset before it is dissolved presents an opposite picture from what government officials and the Bank of Israel wished to see. A series of important pieces of economic legislation, some of which are broadly agreed upon by the coalition and the opposition and that have been approved in the Knesset committees, have been removed from the agenda or have fallen by the wayside at the last minute.

Instead, the government is energetically promoting a series of bills and ordinances arising from political deals within the coalition, from bills on religion and conscription with long-term macro-economic consequences to structural changes in the role of the attorney general, to new regulation on kashrut, the media, and broadcasting.

Agreement? Only on paper

The Credit Database Bill has been described by the Bank of Israel as the most important piece of financial legislation for the government to pass, and it recommended that it should be discussed and presented for second and third reading before the Knesset is dissolved. The bill is meant to deal with a structural failure in the credit market for small and medium-size businesses and their dependence on the banks, which according to the Ministry of Finance "manifests the phenomenon of the ‘captive customer’ and leads to higher financing costs."

The bill, which the Ministry of Finance estimates would save small and medium size businesses at least NIS 1.5 billion annually, was originally part of the Economic Arrangements Bill accompanying the state budget, but was dropped from it in the course of the legislative process. Thanks to understandings between the coalition and the opposition, it made rapid progress through the Knesset Economic Affairs Committee, and all that remained was to vote on it at second and third readings. But despite the rare consensus, the bill was dropped from the Knesset’s agenda last week. It is due to appear on the agenda this week, but it is doubtful whether it will reach a vote.

Another important economic bill that government professionals are keen to pass is the formation of metropolitan authorities, which will represent a deep structural change in transport and infrastructure. Again, despite broad consensus and approval in the Knesset Economic Affairs Committee, the bill is not on the Knesset’s agenda this week.

The Economic Affairs Committee also approved expansion of the law regulating the activity of listed hedge funds, and it was expected to reach second and third readings last week, but that didn’t happen. Other economic bills left out are a bill to regulate securitization, the bill on companies with no controlling core, and the broker-dealer bill.

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Deal with the haredi parties

Meanwhile, the Knesset is busy with passing bills that at best have nothing to do with the economy, and at worst will be damaging to it.

For example, the government is determinedly promoting the Basic Law: Torah Study, which has already passed first reading. The law will establish study of Torah as a fundamental value of the state, as a counterweight to the value of equality deriving from the Basic Law: Human Dignity and Liberty. The underlying intention is to create a constitutional structure for exemption from military service.

Ministry of Finance officials opposed the law as liable to lead to more widespread avoidance of conscription and non-participation in the workforce. Even now, only 50% of haredi men work. The Ministry of Finance warns that if their participation in the workforce does not grow, "by 2065 it will be necessary to raise direct taxes on citizens of the country by 16% in order to maintain the same level of services that the state currently provides without increasing the permissible fiscal deficit."

According to media reports, the law originates in a deal struck by Prime Minister Benjamin Netanyahu with the haredi parties whereby several bills will be advanced in return for preservation of the prime minister’s political block until after the elections.

In this way, a bill freezing arrests of haredi deserters from the IDF, proposed as a temporary ordinance valid until November 30, is expected to pass. The legal advisor to the Knesset Foreign Affairs and Defense Committee where the bill is being discussed expressed opposition to advancing it. "This mechanism bestows a sectoral exemption from the obligations under the Defense Service Law without establishing a balancing counterweight on the other side of the equation," she wrote. The coalition, however, seeks to approve the bill in the committee in time to pass it at second and third readings.

At the same time, the Foreign Affairs and Defense Committee is advancing a temporary ordinance whereby compulsory military service will be extended in order to reduce the need to draft reservists.

Limiting the attorney general

The deal is also meant to ensure the passage of bills backed by the Likud party. One is a bill to split the role of the attorney general, which has passed first reading. The Knesset Constitution, Law and Justice Committee has discussed the sections on the status of a legal opinion from the attorney general, private legal representation before the High Court of Justice, and supervision of the attorney general, and so the Committee’s approval of these sections can be expedited in preparation for separate second and third readings.

Under the bill, a legal opinion by the attorney general with have the status of a recommendation only and will not be binding on government ministries; the attorney general will be appointed by the government and the minister of justice without a search committee; the attorney general’s term of office will automatically terminate at the end of the government’s term; and the government will be able to dismiss the attorney general. The bill also includes a section making it difficult to investigate and indict public servants, including the prime minister and other ministers.

Another bill is for the formation of a committee to investigate the events of October 7, 2023 (the Hamas incursion into Israel) to be appointed by politicians, as opposed to an independent State Commission of Inquiry, the members of which are appointed by the president of the Supreme Court. The bill received a first reading in the Knesset last week. It is not expected to be passed in the current Knesset, although the next government will be able to apply the "rule of continuity" to it and avoid the need to start the legislative process from the beginning. The result, however, is that even this form of investigation will be delayed.

Kashrut in exchange for media

According to Channel 12 News, another deal has been struck between the Shas party and Minister of Communications Shlomo Karhi whereby a bill on kashrut will be passed that abolishes the reform legislated under the previous government in return for the removal of the party’s opposition to Karhi’s media bill. The reform introduced competition into kashrut certification and cancelled the Chief Rabbinate’s monopoly. Under the new legislation, the Chief Rabbinate’s control of kashrut certification will be restored. The cost of the bill is estimated at NIS 750 million annually.

The media bill that Karhi is promoting was approved last week for second and third readings. It allows the establishment of new news channels, abolishes the structural separation between television channels and news companies, and provides for a government app for viewing news channels for free. The United Torah Judaism party announced that it would oppose the bill because the app will broadcast on Saturdays (shabbat) and because of the fear of "immodest content." Shas, however, sought to split the bill, and bring to a vote only the sections relating to regulatory relaxations for new channels, among them Channel 14 (which supports the government).

At the end of last month, the Knesset gave a first reading to a bill revising regulation of local radio stations. Under the bill, the radio market will switch to a model of fifteen-year licenses with broad geographical deployment. Existing franchises will be extended to 2033, contrary to the professional stance at the Ministry of Communications, which is that this will harm competition.

Published by Globes, Israel business news - en.globes.co.il - on July 13, 2026.

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