The economic burden of West Bank settlements

The current perpetual stalemate in Israeli-Palestinian peace negotiations, coupled with the tumultuous state of the Middle East region, has had and will continue to have a deep impact on the welfare of Israeli society. Settlement activities encompass a variety of costs, direct and indirect, visible and hidden.

In our research, we examine how much extra economic support a West Bank settler receives than the average resident of Israel. According to our latest results, the total annual cost of the additional expenditure on settlements in the West Bank amounted to 350 million euro a year. The additional annual expenditure per capita stands at 900 euro and per household at 4,300 euro. Settlements east of the security barrier enjoy significantly greater additional expenditure, amounting to 1,450 euro per capita.

A large portion of national budgets allocated to West Bank settlements is channelled through municipal budgets.

The Government of Israel supports all the local authorities in the country as some of the government services are carried out through them and therefore entitle them to receive a budget. A large portion of national budgets allocated to West Bank settlements is channelled through municipal budgets. Local authorities in the West Bank rely more on government support as a source of income than in the rest of the country. Forty four per cent of the West Bank municipalities’ average income is from budgetary funds, compared to 30% in the rest of the country.

The average annual extra governmental per capita support to West Bank municipalities amounts to 302 euro, or 1,431 euro per family. However, when examining only the municipalities east of the barrier, an even more extreme picture emerges. The additional government support for these local authorities amounts to 774 euro per capita or 3,669 euro per family. It should be noted that the per capita support of settlements of an ultra-Orthodox nature is lower than the support for some of the secular settlements, or those belonging to religious Zionism, such as Megilot R.C. (2,416 euro per capita) and Ma’ale Efrayim (2,400 euro per capita).

In addition, the Government of Israel subsidises between 20% and 70% of land development costs for land purchasers in ‘national priority’ localities. The Ministry of Construction and Housing’s preferred list of localities includes 91 out of 127 settlements in the West Bank. Construction subsidies in the West Bank amounted to 15.3 million euro per year, on average, between 2003 and 2015.

Residents of these localities are entitled to benefits of between 7-10% in income tax, at an annual cost of 45 million New Israeli Sheqels (NIS) per year.

Furthermore, two years ago, 30 West Bank settlements were first introduced into the list of localities whose residents are entitled to tax benefits. Residents of these localities are entitled to benefits of between 7-10% in income tax, at an annual cost of 45 million New Israeli Sheqels (NIS) per year.

A capital built stock assessment revealed that, in the past 40 years, the Israeli Government, local municipalities and private enterprises built around 14.6 million square metres of civilian buildings in the West Bank. The total cumulative costs of the West Bank built stock in 2016 amounted to 31.5 billion euro, of which 28.6 billion was for residential buildings. Most of the construction stock is located in the large settlement blocs west of the barrier, where accumulated inventory amounts to 24.9 billion euro, compared with 6.6 billion east of the barrier.

The total cumulative costs of the West Bank built stock in 2016 amounted to 31.5 billion euro, of which 28.6 billion was for residential buildings.

In the last 22 years, public construction in the West Bank in terms of square metres per capita was more than three times higher than the national average; 0.60 compared to 0.17 square metres per capita. In 2016, 10.2% of all public construction was carried out in the West Bank.

Over the years, the Macro Center for Political Economics has ventured to accurately estimate the cost of West Bank settlements to the State of Israel. Most of the costs analysed in its research are direct governmental costs through budget expenditures. Most of the public is unaware of their scope. The research has also assessed the long-term value of both private and public investment in the West Bank through the capital stock of buildings constructed there.

In the process of the research, a wide array of sources of data and methods were used, some of which are innovative and highly accurate. The goal was to accurately analyse the data and reach a thorough cost estimation, using only validated official data sources involving as little speculation as possible.

In Israeli public and political discourse, settlement costs mostly refer to the direct governmental budgets devoted to activities in the West Bank.

Whether it is due to the high governmental military and civilian expenditure in the West Bank, government incentives and subsidies, physical structures and infrastructure in the settlements, a decline in investments or the threat of boycotts and sanctions, the ongoing settlement operation is costly for the Israeli economy and society.

In Israeli public and political discourse, settlement costs mostly refer to the direct governmental budgets devoted to activities in the West Bank. Most of the public is not aware of the total magnitude of capital invested there in the past, the direct and indirect expenses paid in the present and those to be paid in the future.

The major challenge for decision makers, especially those currently in the ranks of the opposition in Israel, is to translate the data that indicate clear priorities for the benefit of settlements in the West Bank at the expense of areas in need of assistance in the north and south of the country, into a change in the political behaviour of the population. Despite the widely published information that constitutes a considerable part of public discourse, there is still no real change on the horizon.