One of Israel's foremost experts on strategic and military planning has said that the Israeli government's decision to freeze funding to the Palestinian Authority is like "shooting itself in the foot".

Commenting on Israel's response to the PA's move to gain full membership of The United Nations Education, Scientifc and Cultural Organisation last week, Mike Herzog, a former Brigadier General in the IDF, said: "If Israel keeps withholding those funds, the PA will collapse, and it will collapse on our shoulders. It will be an end to security co-ordination between us and the PA."

However, Mr Herzog, who was in the UK last week for the 10th anniversary of Israel lobby group Bicom, defended Israel's announcement that, also in response to the PA's UNESCO bid, it would authorise 2000 new homes across the Green Line. "When the Palestinians unilaterally advance their interests, we are allowed to do the same thing. In any case, the settlements will be built in an area that all assume will be part of Israel in future settlement."

Mr Herzog, who has served as a senior military aide to Israel's minister of defence, also voiced serious concerns about the precariousness of Israel's strategic situation and the prospects for peace with the Palestinians. "We're in a very dangerous a situation in our relationship with the Palestinians, things could escalate very quickly politically and on the ground," he said.

At the same time, with Islamists rising to the fore across the Arab world, the lid on anti-Israel sentiment his been lifted and is finding political expression. "It is very easy to channel energy against us in the Arab world now, and we no longer have a good way of a communicating with the Arab masses. Before we'd settle problems with their leaders; this is no longer the case."

Mr Herzog criticised those in the Israeli government and former intelligence chiefs who have been willing to engage in a public debate over whether or not Israel should attack Iran. "It's a serious, strategic debate in Israel now and will be the most difficult decision that an Israeli Prime Minister has had to take since the inception of Israel. Something like that should not have been discussed in public"

On a potential attack on Iran by Israel, Mr Herzog warned that: "The window of opportunity might be closing. Sanctions are not effective enough and they have recovered from the damage inflicted by Stuxnet. They are enriching uranium to 20 per cent and now have 70kg of enriched uranium."

Britain would be highly unlikely to back Israel in a military operation to destroy Iran's nuclear weapons infrastructure, he said. In any case, "Both the US and major European actors have long lacked enthusiasm for the military option – nothing has changed there."