This is the latest in a long line of manoeuvres by successive Israeli governments to ensure that Jewish and Arab citizens receive differential child allowances so that higher birth rates among Jewish families can be encouraged without also encouraging increased fertility among Arab families.

Such schemes are widely seen as being part of government initiatives to counter the perceived “demographic threat” posed by high Arab birth rates and maintaining Israel’s Jewish majority. Child allowance was only equalised for Jews and Arabs in the mid-1990s.

In the new scheme, the government will pay an extra $115 a month in child allowance to every religious Jewish family with at least four children. The money will not be means-tested, which would have resulted in most large Arab families being eligible.

Instead the child allowance will be paid only to families that receive income benefits from the Education Ministry. In a special arrangement with the state, only religious Jewish families receive such benefits; welfare payments to other Israeli families come from the National Insurance Institute.

The measure will penalise large secular Jewish families too. However, because most of the big families in Israel belong either to the religious Jewish community or to the Arab community, the discrimination will be mostly felt by Arab citizens.

The agreement was called “improper discrimination” by the Haaretz newspaper.

Olmert’s deal with the UTJ party follows a recent failed attempt at discriminating in child allowance payments instituted by Ariel Sharon’s government in June 2002. On that occasion the government used a more traditional excuse for excluding Arab families, targeting those that had not served in the army. As well as an across-the-board 4% cut in child allowance, families that had not done military service were penalised by an extra 20% cut.

The move was designed to cut benefits disproportionately for Arab families, most of whom are not allowed to serve in the army.

However, the 2002 cuts were eventually scrapped after concerted opposition from another ultra-Orthodox party, Shas. Its leaders mistakenly believed the measure would harm their own constituency, which includes large families exempted from serving in the army.

In fact, Shas had misunderstood the way the government was implementing the cuts to penalise only Arab families. As revealed much later by a Haaretz investigation, the ultra-Orthodox were to have their benefits “topped up” by other benefits to compensate them for the loss of child allowance. Haaretz called the scheme “cynical, unethical and racist”.

The reason for targeting Arab families was later admitted by government officials. Referring to the effects of the general 4% cut, a Finance Ministry spokesman rejoiced in early 2005 over signs that birth rates among Muslim women in Israel had fallen marginally. “We are reversing the graph, to defend the Jewish majority in the country,” he said.

It is possible that Olmert’s new child allowance deal was the brainchild of the Demography Council, a secretive organisation established in the Labour and Welfare Ministry that is charged with devising ways to encourage Jewish women to have more children. After being disbanded in the mid-1990s, the council was re-established in September 2002.

The cuts in child allowance fly in the face of statistics showing that Arab families face the highest levels of poverty in Israel. According to figures recently published by the Central Bureau of Statistics, an Arab worker earns a fifth less than his Jewish counterpart, even when they have the same education and hold the same job.

Momi Dahan, a researcher in public finance issues at Hebrew University in Jerusalem, observed recently on Ynet that differences in poverty levels continued “when comparing Arab and Jewish families with similar numbers of children”.

That can be explained by the combined effect of tax and National Insurance Institute benefits even before Olmert’s latest changes. While income benefits lift many Jewish families out of poverty, they leave most Arab families stuck there. In 2002, after tax and benefit adjustments, 44.7 per cent of Arab families were still poor and only 11.5 per cent of Jewish families - or four times as many Arab families as Jewish families.

I’lam Media Center for Arab Palestinians in Israel is a non-profit organization based in Nazareth. It was founded in 2000, by a group of Arab journalists and academics. As the only Arab Palestinian media organization in Israel, I’lam is deeply committed to the democratization of media policies, media practices, and the media landscape in Israel.