Israel's tax plans are scuppering efforts by the UK government to raise funds dedicated to building peace through prosperity-focused schemes for Palestine.
Israeli authorities tightened restrictions on foreign aid after Prime Minister Keir Starmer voiced support for the International Fund for Israeli-Palestinian Peace.
Foreign Secretary David Lammy was expected to host a conference in spring this year that would seek to raise the funds for the initiative from international donors.
But those plans have been thrown into turmoil by an Israeli effort to pass a law that would tax foreign funding to local Israeli NGOs by 80 per cent. Hopes were raised in December last year that the UK could make a contribution to a future peace process by directing the initiative, but a leading member of parliament fears the effort has now run aground.
“It is unresolved. How can it be done if the Israelis are going to impose an 80 per cent tax on foreign state funding of NGOs?” said Dame Emily Thornberry, a veteran Labour MP and chairwoman of the Foreign Affairs Committee.
“We keep asking the government, but we get no straight answer,” she told The National.
The fund was launched in 2018 with the support of Labour Friends of Israel, a group in the UK Parliament, and seeks to support civil society organisations in Israel and Palestine.
Its key organisers are the Alliance for Middle East Peace, a network of 160 Israeli and Palestinian civil society organisations.
Questions about when the conference would go ahead have been raised for weeks, with the government’s Middle East Minister Hamish Falconer promising on Wednesday he would “come back with further details of our approach”.
"We too are committed in to playing our part in trying to build up the connections between the two societies that could allow for the kind of moderate leadership. At the very most local level that is so necessary for making peace," he said.
The FAC's own inquiry into the Israel-Palestine conflict has also spoken to organisations involved in the peace fund, including the Alliance for Middle East Peace.
As a former shadow foreign secretary, Ms Thornberry thinks the UK must acknowledge the role of the US as the key intermediary to changing the dynamic between Israel and Palestine. She said London must demand America lean's on Israelis.
Washington should be pushing for a wider regional deal that recognises that Israel won’t get lasting peace by complete domination. For this regional peace deal to happen the Palestinian issue must be resolved and to her the only thing that makes sense to many in UK politics is a two-state resolution of the conflict.
Speaking in a personal capacity and not representing the views of the committee, Ms Thornberry urged America to put pressure on the Israelis to negotiate.
"It was to be part of a wider regional deal. Israel won’t get lasting peace by complete domination. This is mutual, they need to play their part in the region," she said.
"You can’t get a regional peace deal without the Palestinian issue resolved. The only thing that makes sense has to be two states."
There are political incentives for Mr Starmer to back a successful peace initiative as the UK seeks to play a role in the conflict to patch up community tensions at home.
The Labour Party has struggled to convince its support base of its commitment to peace in the Israel-Palestine conflict, and lost four seats to independent candidates running on a Gaza ticket in the general election last year.
Critics of the party's stance on the conflict, including former British diplomats, have called on the government to recognise Palestine and comply with the International Court of Justice advisory opinion, which found Israel's occupation of Palestine to be illegal.
The IFIPP is expected to be modelled on the International Fund for Ireland, which worked by improving societal and political conditions to pave the way for the Good Friday Agreement in 1998 aimed at ending three decades of violence in Northern Ireland.
Former Conservative prime minister Rishi Sunak also gave cross-party backing to the IFIPP in 2022.
