The United States is ending its decades of funding for the UN agency that helps Palestinian refugees, a week after slashing bilateral US aid for projects in the West Bank and Gaza.

The US supplies nearly 30 per cent of the total budget of the UN Relief and Works Agency (UNRWA) and had been demanding reforms in the way it is run.

The US State Department said in a written statement the United States “will no longer commit further funding to this irredeemably flawed operation”.

The decision cuts nearly $300m (£231m) of planned support.

It comes as Donald Trump and his Middle East advisers, Jared Kushner and Jason Greenblatt, prepare for the rollout of a much-vaunted plan for Israel and the Palestinians, and it could intensify Palestinian suspicions that Washington is using the humanitarian funding as leverage.

The Palestinian leadership has been openly hostile to any proposal from the administration, citing what it says is a pro-Israel bias, notably after the US president recognised Jerusalem as Israel’s capital in December and moved the US embassy there from Tel Aviv in May.

The Palestinian Authority broke off contact with the US after the Jerusalem announcement.

Nikki Haley says U.S. will withhold funding for Palestinian refugees

In 2016, the US donated $355m to the UNRWA, which provides health care, education and social services to Palestinians in the West Bank, Gaza Strip, Jordan, Syria and Lebanon, and it was set to make a similar contribution this year.

In January, the Trump administration released $60m in funds but withheld a further $65m it had been due to provide. The remaining amount – around $290m – had yet to be allocated.

“When we made a US contribution of $60m in January, we made it clear that the United States was no longer willing to shoulder the very disproportionate share of the burden of UNRWA’s costs that we had assumed for many years,” the statement said.

“Several countries, including Jordan, Egypt, Sweden, Qatar, and the UAE [United Arab Emirates] have shown leadership in addressing this problem, but the overall international response has not been sufficient.”

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The statement criticised the “fundamental business model and fiscal practices” of UNRWA, and what the department characterised as the “endlessly and exponentially expanding community of entitled beneficiaries”.

Hundreds of thousands of Palestinians fled or were forced from their homes during the war that led to Israel’s establishment in 1948.

Today, there are an estimated five million refugees and their descendants, mostly scattered across the region – a figure that has become a point of contention. Palestinian leaders assert the right of those refugees to return to land now under Israeli control.