Netanyahu makes cost-of-living promise ahead of Israeli election

OCCUPIED JERUSALEM — In nearly nine years as Israel's prime minister spread over three terms, Benjamin Netanyahu has been a security hawk, promising to do whatever it takes to combat the threat from Palestinian fighters or a nuclear-armed Iran.

But as he opened his campaign for a fourth term ahead of elections set for March 17, Netanyahu stepped away from his security base to make a pitch for the large number of Israelis who are more worried about the high cost of living.

At an economic conference in Tel Aviv on Monday, he promised to cut the value added tax (VAT) imposed on basic foods such as milk, bread, cheese and eggs to zero from 18 per cent.

It was a bold move to head off the threat from more centrist candidates, such as Yair Lapid, the telegenic finance minister who was fired by Netanyahu last week, who are expected to make the cost of living a central plank of their campaigns.

"This is a benefit for millions of citizens a year," said Netanyahu, saying it would cost 2 billion shekels ($500 million), one billion less than a plan Lapid had to cut the VAT on housing for first-time buyers.

"The weaker the family, the more members in a family, the greater the savings will be," he said, casting the promise as attractive to the ultra-Orthodox community, who tend to have large families and could swing the election this time.

While security issues are never far from Israelis' minds, particularly after the war in Gaza, surveys indicate that the cost of living is the dominant issue ahead of the next election.

A poll by Israel's Channel 10 this week showed nearly half of those surveyed (48 percent) put high prices and social policies as the main influence on how they will vote.

That is higher than a poll conducted before the last election in January 2013, when 43 per cent cited economic issues and the cost of living as the biggest concern.

In that vote, Lapid, a former TV presenter, won 19 of parliament's 120 seats, making his party the single biggest.

After years of hammering on about the existential threat Israel faces, Netanyahu knows he has to offer hope to those struggling to make ends meet if he is to hold on to power.

"The other parties are making the point for socio-economic issues and they have good political reasons to do it," said Gideon Rahat, a professor of politics at Hebrew University.

"Many people in Israel have had enough of security and foreign policy. They want progress on socio-economic issues."

While Lapid's star has faded and polls predict he will win only around nine seats in the next election, the new threat for Netanyahu comes from Moshe Kahlon, a former communications minister and ex-member of Netanyahu's own Likud Party.

Kahlon got the credit for bringing mobile phone costs down dramatically over the past two years, making him the new cost-of-living champion. Some polls predict he could win 12 seats next year. The question is whether he can bring his price-cutting powers to other sectors.