The Israeli prime minister, Binyamin Netanyahu, has encountered severe turbulence after it emerged that he ordered a double bed to be installed on a plane that carried him and his deeply unpopular wife, Sara, to Baroness Thatcher's funeral in London last month – at a cost of $127,000 (£83,000).

The revelation comes amid growing resentment over an austerity budget proposed by the finance minister Yair Lapid, a former TV personality who won popular support in January's election by promising to champion Israel's financially squeezed middle class. Up to 15,000 people demonstrated in Tel Aviv, Jerusalem and other cities on Saturday night in an echo of the massive social justice protests that swept the country two years ago.

Following an outcry over the cost of installing a "rest chamber" on the chartered El Al flight, Netanyahu's office said that henceforth no sleeping cabins would be provided on short-haul flights to Europe.

Initially, officials defended the move – disclosed by Israel's Channel 10 on Friday evening – in a statement that was immediately mocked by commentators for its detailed account of Netanyahu's schedule.

The statement said: "The prime minister took off for London on the night after Independence Day, in the course of which he attended a reception for outstanding soldiers at the presidential residence, the World Bible Quiz, a reception for diplomatic personnel in Israel and the Israel prize ceremony. The flight was booked for midnight after a day full of events, and afterwards the prime minister was to represent the state of Israel at a number of official international events, including meetings with the prime ministers of Canada and Britain. It is acceptable for the prime minister of Israel to be able to rest at night between two packed days as those."

El Al, Israel's national airline, was paid $427,000 for the charter flight, including the cost of the chamber. A smaller plane, without sleeping quarters, would have cost $300,000, according to Israeli media reports.

Channel 10 pointed out that the Israeli president, Shimon Peres, who will be 90 next month, spent an 11-hour flight to South Korea seated in business class.

Writing in Yedioth Ahronoth, Israel's biggest-selling newspaper, Sima Kadmon said: "We thought that nothing could surprise us anymore when it came to the Netanyahus' personal behaviour. Well, we thought wrong. It turns out that King Bibi and Queen Sara are entitled to do everything … The double bed that was installed on the plane cost the Israeli public, which is buckling under the weight of the austerity measures, half a million shekels. Is there no shame?"

The disclosure of Netanyahu's in-flight sleeping arrangements follows the revelation earlier this year of a prime ministerial budget of $2,800 for ice-cream. A contract with a Jerusalem ice-cream parlour was swiftly cancelled.

Meanwhile, the Israeli public is facing a 1.5% rise in income tax, a 1% increase in VAT and a reduction in child allowances as part of an austerity package, which critics says disproportionately penalises the middle class.

Anger at demonstrations on Saturday focused on Lapid, whose party Yesh Atid (There is a Future) came second in January's election and is now a key partner in Netanyahu's coalition government. Lapid had pitched his campaign at middle-class voters who were the mainstay of 2011's social justice movement.

Daphni Leef, one of the protest leaders, called on Lapid to "take from the tycoons, not the people … from those who have and not from those who don't".

Lior Tzur, 31, told the Jerusalem Post: "Lapid sold us all an illusion that he'll change things and help the middle class, when really he's just going to continue the same policies of money and power that existed before."

A poll published in the pro-government Israel Hayom tabloid last week found that more than 50% of respondents said their confidence in Lapid had fallen since the election.