My right honourable friend the Secretary of State for International Development (Douglas Alexander) has made the following Statement.

I wish to inform the House that the UK intends to make a contribution of £3 million to the Palestinian Authority (PA). This will go towards paying private sector arrears of around £225 million accrued by the PA. Combined with a £3 million contribution to the temporary international mechanism (TIM) in May, a £1 million contribution to the work of the International Committee of the Red Cross and a £15.6 million payment to the UN Relief and Works Agency in April, this brings the UK’s total bilateral spend this financial year to £22.6 million.

The last year has seen a deterioration of the chronic economic decline in the Occupied Palestinian Territories. Israel has withheld clearance revenues owed to the PA, leading to the PA having to reduce or stop entirely the payment of civil servant salaries. At the same time, the PA has run up significant debts with private sector suppliers. This has in turn reduced investment, thereby further shrinking the productive capacity of the economy.

Israel has now agreed to transfer the customs revenue, allowing the Government to pay salaries again. However, the large backlog of public debt remains unpaid. The Prime Minister, Salaam Fayyad, has requested international support to address this. Direct international assistance through the Palestinian Authority’s central treasury account will boost the economy and make clear international approval for Fayyad’s Government. It will also increase Palestinian companies’ ability to continue trading and so invest and employ more people.

In the past year, DfID has provided £15 million out of a total of £265 million committed through the TIM. This has successfully stemmed the economic decline in the Occupied Palestinian Territories from a projected 27 per cent to around 10 per cent. The quartet recently extended the TIM until the end of September. It has already been aligned with the Ministry of Finance to enable full salaries to be paid to public sector workers. Following the creation of the emergency Government in June, DfID can now resume direct financial assistance.

The UK is working with President Abbas and Prime Minister Fayyad as they seek to make the Palestinian Authority more responsive to the urgent needs of all Palestinians. But ultimately the only way to guarantee the long-term welfare of the people is for all sides to give up violence and work towards a two-state solution.