States, Russian & the European Union, I have concerns over the cutting of funding. For example, one effect of the freeze in aid is that salaries for some 160,000 government workers have largely gone unpaid. This cannot but further undermine the Palestinian economy and civil society.

A significant share of donors' assistance in the last four years has been for relief efforts aimed at poverty alleviation. Poverty will undoubtedly continue to be a serious problem as long as current political conditions persist, and certainly the grotesque levels of poverty in some of the Palestinian Territories, especially in the Gaza Strip, remain a recruiting sergeant to disaffected and alienated youth. It is right therefore that poverty alleviation should have a high priority in Palestinian development strategy.

Micro-financing has helped develop economies around the world and I believe that there is no reason why it can't be part of the solution in Palestine. I have seen for myself the success of micro-financing. In some parts of the globe, including in the Indian sub-continent, micro-financing of very small scale enterprises has proved to be a significant stimulus to economic growth and the creation of a new bread of entrepreneur.

It has also provided woman with the opportunity to gain empowerment through gaining access to funding and resources to start small home businesses and this is especially important at this current juncture in time. In effect, they can help themselves and their local communities through such small entrepreneurial schemes which will help to circulate finance within local villages and communities.

I have recently been asked to become involved with a group carrying out micro-financing operations in Palestinian Territories and I believe that micro-financing could provide some Palestinians with the key to improving their own living standards and aiding economic development. Could the Noble Lord tell the House what steps it has taken to support micro-financing schemes in the Palestinian Occupied Territories?

My lords, unfortunately I feel providing relief and development is only a short-term solution. It is important to recognise the adverse effect of economic dependence of the Palestinian Occupied Territories on Israel, formed over the past decades. On the point, may I ask what measures Her Majesty's Government are taking for a new policy framework to move from providing relief and development only to one which helps support the Palestinian people become more economically empowered?

Without such empowerment, all forms of peace proposals and dialogue, although valuable, threaten to remain ineffective. As poverty aids violence, so wealth creation will aid stability, for both the Palestinian Territories and Israel. Experience in the Holy Land has shown that hopelessness leads to violence, but the prospect for empowerment leads to peaceful coexistence.

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