Reports say the money will go towards building more West Bank settlements, protecting the homes of Jews in annexed east Jerusalem and will fund new housing in Israel’s Negev desert and Galilee. The package was approved by eight votes to seven.

On hearing the news, Palestinian negotiator Saeb Erekat accused Israel of jeopardising the roadmap to peace. ‘At a time when they speak about withdrawing settlements from Gaza, they allocate millions of dollars for settlements throughout the West Bank and Gaza,’ he said.

In a separate blow to Sharon’s settlement relocation plans, Israeli Housing Minister Effi Eitam said on 17 February he would draft new laws which would prevent Israel’s army from evacuating settlers and dismantling their homes.