The chair of Labour Friends of Israel has criticised the government’s internal review of British funding in the Palestinian territories.

Joan Ryan, Labour MP for Enfield North, said government’s probe into how aid from the Department for International Development (DiFD) is used in the region was “simply smoke and mirrors”.

The issue is due to be debated in the House of Commons on Monday. Concerns have been raised amid allegations that taxpayers’ money was being used to fuel incitement and pay “salaries” to convicted Palestinian terrorists.

Ms Ryan said she had no confidence in DFID reviewing itself.

She said: “This is the department which - even last month - was showing amazing nonchalance in the face of the serious allegations that the Palestinian Authority is deceiving international donors and, in fact, continuing to effectively pay salaries to convicted Palestinian terrorists.

“This is an issue which has been put to the department repeatedly over recent years and which is has consistently and repeatedly failed to act on. It’s also the department which - for at least three years - has been telling my LFI colleagues that it’s committed to funding more coexistence projects which bring Israelis and Palestinians together but which, we find, is investing only 13 per cent of the Conflict Stability and Security Fund spend in Israel-Palestine on such work.

“Given this, and the importance of the Foreign Office in these matters, we need the independent, cross-departmental, cross-party review which I first called for in February. DFID marking its own homework is simply not going to cut it.”

Her comments came after a DifD spokesman said the government would continue to review funding as part of its Bilateral Aid Review.

Justine Greening, Secretary of State for International Development, is in charge of the review and is expected to announce its findings by the autumn.