The British government has reportedly suspended aid payments to the Palestinian Authority worth up to £25 million over concerns that taxpayer money was being funnelled to convicted terrorists.

According to the Sun, Priti Patel, the International Development Secretary, instructed her department to freeze the payments, a third of the total the UK sends to the PA, pending an investigation.

In February, Joan Ryan, chair of Labour Friends of Israel (LFI), asked David Cameron to launch an independent review of the UK’s funding of the PA.

The then-Prime Minister refused, claiming the UK’s funding was subject to “a thorough vetting process” and that the funding was used "to pay the salaries of civil servants, thereby delivering basic services, maintaining stability and reducing poverty".

This was despite a Mail on Sunday report in March that millions of pounds of UK aid funding was being handed over by the PA to the PLO, which was paying stipends to the convicted murderers of Israeli civilians.

In June the government announced it was launching a review into its funding of the Palestinian territories, with reports that Justine Greening, the International Development Secretary at the time, would announce the findings in the autumn.

A Department for International Development (DfID) spokesperson said:

“The UK remains firmly committed to supporting the Palestinian Authority to build and strengthen the institutions needed for a two-state solution, which is essential for the prosperity and security of the region.

“As part of her examination of UK assistance to the Occupied Palestinian Territories, the International Development Secretary will ensure this financial support gets the maximum impact and best value for money to the UK taxpayer.”

In a statement following the Sun's report, Ian Austin MP, a parliamentary supporter of LFI, said: “British aid has a key role to play in supporting the alleviation of poverty and economic development and the promotion of peace and coexistence in Palestine. Those goals are, however, undermined by the current misuse of aid by the Palestinian Authority.

"I welcome the fact therefore that, after months of procrastination and denials, DfID appears finally to have accepted that aid to the Palestinian Authority cannot continue for so long as it engages in antisemitic incitement and remains the ultimate paymaster of salaries to convicted terrorists."

But Mr Austin expressed surprise over the reported decision, saying that Ms Patel had written to him three weeks ago confirming that in its most recent assessment, DfiD found the PA was not in breach of rules governing the provision of UK aid.

He said: "I am calling again on the Secretary of State to release that assessment and repeat LFI’s call for a full, independent inquiry into how British aid can best support the realisation of a two-state solution. DfiD simply does not have the credibility to conduct its own review behind closed doors.”

Conservative Friends of Israel welcomed the reported announcement.

CFI parliamentary chairman Sir Eric Pickles and CFI honorary president Lord Polak said: "Today's announcement is an important step towards peace and those who work for it on all sides. It sends a wake-up call to the Palestinian Authority.

“As the new Secretary of State for International Development, Priti Patel, has acted quickly to challenge a long-standing abuse of well-intentioned international aid money.

“This announcement will benefit Palestinian residents as funding will be unambiguously focused on coexistence, economic development and peace."

Richard Verber, senior vice-president of the Board of Deputies said: “We do not take issue with the British government supporting genuine development in the Palestinian territories. However, we have long been deeply concerned by the Department for International Development’s assertion that British tax money categorically does not fund terrorism and incitement.

"We welcome this move and hope that a robust and thorough investigation will be carried out.”

Simon Johnson, chief executive of the Jewish Leadership Council said: “The decision to suspend aid to the Palestinian Authority by the International Development Secretary, amid accusations of terrorism, reflects the worst fears of many within the Jewish community.

"It is vital that the Department for International Development (DFID) is robust in ensuring funds are used to help those in need and not to support destruction and disruption within an already tense political climate.”

Luke Akehurst, director of We Believe in Israel,said he was delighted the government was taking "long overdue" action.

He said: "A combination of sustained grassroots activism and a new Secretary of State with the will to end abuse of aid money has meant this disgraceful state of affairs could finally end.

“I look forward to a more rigorous process where DfID properly audits use of UK funds to the PA to ensure it helps build a peaceful future for Israelis and Palestinians, rather than facilitating more violence and conflict.”