Alongside managing the military campaign during the Iron Swords War, the government was required to conduct a “campaign” on the civil and economic front, aimed at providing broad support to a population whose way of life was deeply disrupted during the war.
This special volume, published as part of the State Comptroller’s reports on the October 7, 2023 terrorist attack and the Iron Swords War, includes two chapters addressing the government’s response in the civil and economic spheres.
Government Response to the Needs of Northern Communities During the Iron Swords War: The Civil-Economic Front
The consequences of the northern front during the Iron Swords War for hundreds of thousands of residents in northern Israel were unprecedented in scope, intensity, and duration. The following facts and figures offer a glimpse into the reality these residents have faced: tens of thousands of residents in northern communities were evacuated or left their homes, and hundreds of thousands of others who remained have suffered and continue to suffer from the effects of the war; hundreds of buildings sustained significant damage; employment was severely affected, including numerous local businesses; a considerable portion of schoolchildren experienced serious emotional distress, and the northern education system has faced – and continues to face – major challenges; approximately half of northern residents expressed doubt about returning to live in the region.
Government response to an extreme event of this kind requires the political leadership and the executive branch to make swift decisions and implement them in a purposeful and effective manner.
The chapter on the government’s handling of northern communities during the Iron Swords War – on the civil and economic front – shows that, in terms of actual outcomes and over a prolonged period since the war’s outbreak, the government failed to provide the necessary response to enable the return of residents and the rehabilitation of the north.
At the root of this failure lie three key gaps in government action: (a) the excessive and costly amount of time that passed before the government made its first comprehensive decision to take action; (b) a year and a half after the war began and communities in the north were evacuated, no permanent coordinating body has yet been appointed to lead the response - as of now, even a temporary replacement has yet to be appointed to this critical role; (c) as of the publication of this report, a multi-year plan for the rehabilitation of the North has yet to be formulated.
This grave outcome lies first and foremost at the doorstep of the Prime Minister’s Office and its head, Prime Minister Benjamin Netanyahu, as well as the Office’s former Director General, Yossi Shelley, who failed to carry out the core tasks assigned in two government decisions, including formulating a long-term framework for the rehabilitation of northern communities and preparation for the return of evacuated residents to their homes.
In addition, the State Comptroller's Office finds that criticism of the Ministry of Finance is warranted for insufficient budgetary preparedness to implement a government decision from May 2024, and for a lack of determination in formulating a multi-year plan for the rehabilitation and development of the North.
The citizens of Israel, having experienced a severe and prolonged disruption to their way of life, were entitled to a higher quality and more efficient governmental response than the one they received. It is imperative that the findings of this chapter be promptly studied and that all necessary measures be taken to ensure faster response times and to improve the government’s capacity to formulate and implement policy. In light of the above, the government must make every effort to assist the residents of the two regions that have been severely affected since the outbreak of the war.
Implementation of Economic Assistance to Small Businesses in the Initial Months of the Iron Swords War
The Iron Swords War caused significant harm to many small businesses, which were forced to contend with
reserve mobilization of their owners, labor shortages, a marked slowdown in economic activity, and in some cases prolonged closures due to security directives, particularly in areas from which the population was evacuated.
To ensure optimal support for small businesses during both routine times and emergencies, and especially for microbusinesses, it is necessary to prepare in advance with economic contingency plans. These plans should be based on possible reference scenarios derived from various emergency events, enabling a rapid response at the push of a button. In preparing such plans, it is essential to map the economic sectors most likely to be affected in each emergency scenario and to identify the specific needs that must be addressed. The expected costs of providing assistance should be assessed, as well as the funding sources and the overall contribution of the aid to the economy. It is also important to identify population groups requiring tailored support - for example, reservists who own businesses. These plans should be developed in full cooperation among the relevant government ministries and should be informed by lessons learned from previous emergencies.
Appropriate solutions must be provided for a reality in which small business owners are called up for reserve duty and must abruptly suspend their routine and business operations for an extended period. Support must also be provided to business owners who have been evacuated from their homes and are coping with both displacement from their social environment and with uncertainty and economic hardship. Support for these populations should include dedicated assistance programs, extensions of the deadlines for submitting applications to existing aid programs, and prioritization of their requests. Given the need to assist many small businesses, it is important to establish a single coordinating body with broad authority and a significant budget, capable of overseeing and coordinating the efforts of the various government ministries involved in supporting small businesses. It is recommended that the Ministry of Economy, which oversees the activity of the Small Business Agency, take the lead in managing efforts related to small businesses
both in times of routine and emergency, coordinate among the various bodies involved in providing assistance, and oversee their operations. Coordination and oversight in this area will help prevent redundancy, inefficiency, and waste of resources.
The Ministers of Economy and Finance must instruct their respective ministries to draw lessons from the existing aid programs for small businesses and examine what type of support is required, particularly for businesses located in evacuated areas and in regions adjacent to active combat zones.
It is recommended that the Prime Minister, in his capacity as Chair of the Socio-Economic Cabinet, and the Minister of Finance, as Alternate Chair, convene the Cabinet to conduct ongoing oversight of the effectiveness of economic assistance programs for businesses (including small businesses) and take appropriate action to ensure an adequate response. This is especially critical in light of the prolonged nature of the war and its economic impact on businesses, particularly those located along the confrontation lines.
In conclusion, I extend my sincere appreciation to the staff of the State Comptroller’s Office for conducting this audit in a professional, thorough, and in-depth manner.
Let us hope and pray for the return of all the hostages, for the safety of our soldiers, and for the success of the security forces in defending our country.
Matanyahu Englman
State Comptroller
and Ombudsman
Jerusalem,
February 2025