The UK’s foreign aid budget is acting as an incentive to Palestinian terrorists, a Labour MP has claimed.

Joan Ryan said aid handed to the Palestinian Authority (PA) is being indirectly used to pay prisoners who have committed violent attacks during the bitter Israeli-Palestinian conflict.

International Development Minister Desmond Swayne denied the claims, insisting money given to the PA funds specific civil servants, helping to prepare a Government in the event of a two-state agreement.

But Ms Ryan suggested the aid frees up extra cash within the PA to pay “convicted Palestinian terrorists”, including Taleb Mehamara who targeted Israelis in a shooting attack.

Speaking during a debate on foreign aid spending in Westminster Hall, she said aid given to the PA is failing the UK’s scrutiny tests.

The Enfield North MP said: “Let me give one example, the issue of the PA’s payments to convicted Palestinian terrorists..

“These are not, as one Dfid minister claimed in 2012, social assistance programmes to provide welfare payments, instead by operating a perverse sliding scale where you receive more money the longer sentence you receive, in some cases as much as five times the average monthly wage in Ramala, they actually incentivise people to commit the most terrible acts of violence.

“I simply don’t see how that advances the cause of a two-state solution.”

She added: “The payments we make enable the Palestinian Authority to make their payments to prisoners.”

You can watch Joan Ryan’s speech to the committee here:

Her complaints were echoed by Labour former minister Ian Austin, who said the aid payments were in direct contradiction to the demands of the international community.

Mr Swayne insisted “British taxpayers’ money does not fund terrorism” and defended the thoroughly scrutinised list of aid recipients.

He said: “Our taxpayers’ money goes to build the Palestinian Authority so that it is able to morph into the Government of a Palestinian state when that opportunity arises and we pay named civil servants for the provision of public services.”

Ms Ryan, who accused the minister of “wilfully” ignoring the matter, said the aid should be suspended pending an inquiry and aid instead directed to co-existence projects.

Former international development minister Sir Alan Duncan complained that the debate, in response to a petition questioning the UK’s fixed 0.7% foreign aid spending, had been hijacked by those who want to “demonise” Palestinians.

The Tory MP said: “This is a debate on 0.7%, and it would be a tragedy and indeed repulsive if it were hijacked by those who want to use it in order to demonise Palestine and Palestinians, and that it should concentrate on 0.7 and only on that issue.”

Conservative Matthew Offord (Hendon) said: “In October 2013, members of Yesh Din took part in an Arab celebration on the ruins of a Jewish community in Homesh, with attendees desecrating Jewish symbols and waving anti-Semitic posters – including one depicting a Jew with a spear through his head.

“This is where our money is going. I’d like the minister today to hear our concerns and to not continually view this problem through a prism of a conflict between the Israelis and Palestinians.

“Our money is going to some causes which he would be ashamed of, I’m sure, and I hope we can take that message to the Government today and make sure that we actually look at our spending.”

Labour’s Andy Slaughter later suggested Tory MP Andrew Percy and others were “hijacking this important debate to give effectively cover to the Netanyahu-Lieberman regime”.

He added this was a “gross abuse” of the subject.

Mr Percy (Brigg and Goole) replied: “I mentioned patronising and sniffy earlier and that was a prime example of it.

“It was so patronising, it was not worthy of a response.”

Former communities secretary Eric Pickles said it is important to scrutinise the impact of aid on behalf of taxpayers, especially when it is directed to areas of conflict.

Referring to the Palestine-Israeli conflict, the Tory MP said: “It’s no good just saying ‘ we don’t fund terrorism’ – there is a kind of knock on effect.”

He added: “Surely it is not unreasonable to say that if you’re going to receive money from the British government that you should unequivocally renounce violence in all its forms and to work for a two-state solution.”

Sir Eric Pickles during the debate:

Labour’s shadow international development secretary Diane Abbott said she was “confident” that Difd was not directing money to “so-called terrorists” but insisted that aid should be scrutinised.

She said: “It is possible to passionately support 0.7% of GDP as our commitment on aid and yet feel strongly about accountability and transparency, as I do.”

She added: “Labour stands not just for a commitment of 0.7 but we stand for a continuing commitment to scrutiny and accountability because not just our voters but the people of the Global South deserve no less.”

Mr Swayne dismissed suggestions that the standard for projects receiving aid had been lowered since the budget increased.

He told MPs: “I’m the low bar, I’m the one that has to be persuaded that projects are value for money.”

He added: “We have to tackle the causes of poverty and injustice because if we don’t deal with these problems at source we know where they are coming.

“They are coming to our own doorsteps and shores. It is undoubtedly in our national interest.”

However, he accepted it was always “controversial” to spend money abroad and not at home in the UK.

“I put it this way. We have pledged to spend 0.7% of our national income on international development. That means we have 99.3% to spend on ourselves,” he said.

“I do not know anyone who spends 99.3% of their income on themselves, I’m not sure I want to know such a person.

“What influence would we have in the world, how could we carry our heads high if we were to abandon this important pledge?”