A plan by Israel's Finance Minister, Moshe Kahlon, to allow Palestinian companies greater access to Israel's building sector could herald a split in the cabinet over both security and housing policy.

It comes as another showdown brews between Israel's security establishment and the government over policy on Gaza.

Mr Kahlon's plan, which has been discussed with his counterparts in the PA, would allow Palestinian contractors and construction companies to participate in Israeli building projects, and perhaps even compete for tenders.

It is much more ambitious than previous, similar plans that merely called for more Palestinian construction workers to be allowed to enter Israel every day. Around 100,000 workers currently cross the Green Line daily for work, but less than half of them do so with permits.

Prime Minister Benjamin Netanyahu has yet to express his opinion on the plan, though he has been kept abreast of Mr Kahlon's discussions.

Israel's National Security Council argues for better Gaza infrastructure

Some more right-wing ministers, however, are expected to object to the Palestinians being offered financial incentives in a period of increasing terror attacks.

The IDF has already expressed its support for increasing the number of Palestinians being allowed to work within the Green Line; its intelligence-based view is that the financial incentive will help to prevent further attacks.

The army is also in favour of finding ways to allow the Palestinians in Gaza to build a seaport in order to ease the blockade. For now, however, Mr Netanyahu and Defence Minister Moshe Yaalon are opposed to this.

The security chiefs have long been in favour of allowing Gaza more financial and infrastructure development, despite Hamas's rule there and the fear that building materials going into the Gaza Strip could also be used to build tunnels and rocket silos.

However, the opinion both of the IDF and members of the National Security Council is that it would be a worthwhile trade-off to create civilian installations that the Palestinians would be loth to lose in another outbreak of warfare.