The Israeli government is spending a disproportionate amount of its stretched budget on settlements despite the country's economic problems, according to a new report. Peace Now, an Israeli group favouring negotiations with the Palestinians and the establishment of a Palestinian state, found that in 2001, Tel Aviv spent a total of $450 million on West Bank settlements and that $1,500 per capita more was spent on settlers than on citizens living in Israel. The money was spent on roads, housing, industrial development and income tax benefits - to encourage further settlement activity, according to the report. 'The policy of the Israeli government is to try to increase the number of settlers beyond the Green Line and to make their life and economy better than life in Israel,' Peace Now spokesman Yariv Oppenheimer said. More than 200,000 Israelis live in settlements in the West Bank and Gaza. Settlers groups dismissed the report. Israel's national unity government collapsed in October over Prime Minister Ariel Sharon's 2003 budget proposal of a $145 million increase in funding for settlers (MEED 1:11:02). Israel is in the midst of its worst recession for decades. Unemployment in November stood at 10.5 per cent and gross domestic product (GDP) is forecast to fall in 2003 for the third consecutive year.