Britain has been accused of anti-Semitism by a hardline Israeli MP because Britons are to be warned against buying property in settlements in Israeli-occupied Palestinian territories. An advisory, to be posted on the Foreign Office website, is to refer to settlements in East Jerusalem, the West Bank and the Golan Heights, all areas occupied by Israel during the 1967 Middle East war. It will warn that future peace deals between Israel and the Palestinians and Israel and Syria could affect property purchases there.

Yuval Steinitz, a hopeful for the post of foreign minister if Benjamin Netanyahu leads the right-wing Likud party to victory in February, advised Britain to abandon the campaign. Foreign Office officials said that it would include possible steps against newspapers advertising property in the occupied territories.

"This is none of Britain's business," said Mr Steinitz, former chairman of the Knesset's foreign affairs and defence committee. "When Israel is boycotted one should wonder if there is no implicit anti-Semitism. Let us see the British government boycott products from China because there is no democracy there before they turn to Israel."

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The rhetoric raised the spectre of a return to the angry disputes between Britain and Israel over settlement construction during Mr Netanyahu's tenure as prime minister from 1996 to 1999, especially the building of the Har Homa settlement at Jebal Abu Ghneim in occupied East Jerusalem.

Settlements are considered illegal under the Fourth Geneva Convention, which prohibits an occupying power from moving its nationals into the occupied territory. Last month, an EU campaign was launched for clear labelling to distinguish between goods produced inside Israel, which are exempt from EU tariffs, and those made on Israeli settlements in the occupied West Bank, which are not.

Britain says it acting in response to Israel's failure to uphold a commitment under the Annapolis peace process to freeze settlement building. "We hear a lot said about settlements being a major obstacle to peace. We haven't seen action. Now we are seeing how we can take action on the basis of that political position," said a Foreign Office spokesman.