The government has denied that aid money sent to the Palestinian Authority is reaching convicted terrorists in Israeli prisons.

The Zionist Federation and Wizo UK have claimed that millions of pounds of British money was being used to pay “salaries” to jailed Palestinians.

But a spokesman for the Department For International Development (DFID), which gives £33 million a year to the PA, insisted that the funds are ring-fenced for PA civil servants.

“UK taxpayer funds do not pay for Palestinian prisoners,” he said. “British funding to the PA is used for the sole purpose of paying the salaries of civil servants, who are responsible for providing health, education and other essential services, including security.”

But ZF chairman Paul Charney rejected the government’s statement, saying money for prisoners was “the PA’s top priority.

"We hope DFID will convincingly set out how it is safeguarding this aid — or else stop bankrolling a government that pays its citizens to murder Israelis.”

Linda Boxer, the executive director of Wizo UK, insisted: “EU, UK and US funding is abused.”