The Israeli government has approved the connection of the new Palestinian city, Rawabi, to the water grid after more than a year of delays.

The decision will allow the company building Rawabi, which is designed to house 40,000, to finally hand over the keys to the first new flats.

Israel's security establishment had recommended the supply of water to Rawabi but pressure from Israeli settler councils, which claimed that the new town could pose a security risk along with Israeli anger at the Palestinian Authority's unilateral policy, caused a delay in the decision.

In addition, the government decided last week to use some of the Palestinian tax funds Israel has withheld for the last three months to partially defray the Palestinian unpaid debt to the Israeli Electric Corporation.

The debt, which currently stands at nearly NIS 2 billion (£325 million), has accumulated over the last two years and for the first time, IEC cut off the power to a number of Palestinian cities for an hour, twice last month, as a warning.

At this stage, NIS 300 million (£49 million) of the frozen tax funds will be used to pay part of the electricity bill. The tax duties which Israel collects on behalf of the Palestinian Authority were frozen three months ago in retaliation at the Palestinians' decision to refer Israel to the International Criminal Court for alleged war crimes.