Israel is up in arms over a declaration by a British government spokesman that the UK is funding political activity in Israel.

British spokesman Martin Day said in an interview in Dubai with Al-Arabiya television last week that the British government was "taking practical steps towards freezing settlement activities."

"For instance," Day said, "we finance projects aimed at halting settlement activities. One of these projects seeks to build new Palestinian neighborhoods in east Jerusalem and save Palestinian houses from demolition."

In addition, Day said in an Arabic interview, "we also finance organizations that monitor settlement activities."...

...Yossi Levy, the ministry's spokesman for the Hebrew press, characterized Day's comments as the "height of chutzpah," and said such activity was "unheard of."

Foreign Ministry spokesman Yigal Palmor said, "We can't recall any other case of a democratic country funding political activities inside another democratic country."

Additionally, he said, this makes no sense from their point of view because any political activities they are backing will lose credibility in the eyes of the Israeli public when it is revealed that these activities are funded by a foreign government.

"How would the British feel if another country funded political activities of groups within the UK?" he asked...

Recent revelations about foreign government funding for local NGOs involved in political activity have triggered discussions by senior Israeli officials about the possibility of making such aid illegal, The Jerusalem Post has learned.

The senior officials are looking into whether it might be possible to ban donations from foreign governments to political NGOs, just as it is forbidden for foreign residents, let alone governments, to contribute to Israeli political parties.

One of the questions that will have to be addressed, according to an official involved in the discussions, is what constitutes a political NGO. While it seems that there is an obvious distinction between an organization like Hadassah, which funds hospitals, and one like Breaking the Silence, which has a perceived political agenda, the distinctions would have to be spelled out in legislation.

The discussion follows Post revelations that foreign governments are funding of Breaking the Silence, which last week added its voice to a number of NGOs that have issued scathing reports of the IDF's activities in Gaza during Operation Cast Lead.

Israel has already contacted the Dutch and British governments about their funding of the organization, and is expected to soon take up the matter with the Spanish government as well.

The Spanish Foreign Ministry's agency for international development cooperation budgeted 80,000 for Breaking the Silence in 2009. It allocated 100,000 for the Association for Civil Rights in Israel, and another 80,000 for the Israeli Committee Against House Demolitions, a group led by far-left activist Jeff Halper...