Israeli Prime Minister Benjamin Netanyahu has called for the United Nations’ Palestinian refugee agency to be “dismantled”, blaming incitement against Israel.

The call was made to Nikki Haley, the United States’ Ambassador to the UN, with Netanyahu arguing that Palestinian refugees should not have their own organisation.

“I told her that the time had come for the United Nations to reconsider the continued existence of UNRWA [the United Nations Relief and Works Agency for Palestine],” he said. “In UNRWA’s institutions, there is a great deal of incitement against Israel.”

UNRWA runs hundreds of schools for Palestinian refugees in the Gaza Strip, the West Bank and in east Jerusalem, as well as in neighbouring states with high numbers of Palestinian refugees, including Lebanon, Jordan and Syria. It distributes aid, trains teachers and provides health and social-care services.

It is not clear what action Haley will take, but the US is the largest country donor to UNRWA, contributing $368 million annually.

Earlier this month, the agency discovered a tunnel running underneath one of its centres and reported this, condemning Hamas. Israeli leaders complained to the United Nations, also blaming Hamas, which has denied responsibility.

This week the Israeli PM said Palestinian refugees should be treated the same as the world’s many millions of other refugees, who are all supported by another UN body, under the auspices of the UN High Commissioner for Refugees (UNHCR), which has also drawn scorn from Israeli leaders.

UNRWA spokesman Chris Gunness said the organisation got its mandate from the 193-member UN General Assembly, and only the Assembly could take it away. It was given a three-year extended mandate in December by a large majority.

“The only one reason UNRWA supports five million Palestinian refugees is the continuing illegal occupation of Palestinian land and the denial of the right of return,” said Palestine Solidarity Campaign director Ben Jamal.

“Netanyahu’s notion that UNRWA ‘perpetuates’ Palestine’s refugee problem suggests a break with reality. Defence Minister Avigdor Lieberman said disloyal Palestinian Israelis should be beheaded and Justice Minister Ayelet Shaked described Palestinian children as ‘little snakes’ so let’s take complaints about incitement with a pinch of salt.”