A ministerial committee in Israel has moved to curb the funding of non-governmental organisations (NGO), including human rights groups, with the approval of a bill that would limit international donations to around £3,400 (20,000 shekels) a year.

A second bill would tax organisations at a rate of 45% on all foreign donations.

The move has sparked outrage in Israel, with the Labour leader Shelly Yachimovich saying Prime Minister Benjamin Netanyahu's government has set out to “declare war against the judicial system, injure free speech and push itself further away from the democratic, enlightened world".

Opposition groups claim that the bills, which have yet to pass the parliament, are an attempt to restrict foreign groups critical of the coalition government.

The Israeli government moved towards limiting foreign funding following criticism from liberal groups within Israel during and after the 2009 Gaza war.

If the bills are passed, one of the groups most affected by the legislation would be the New Israel Fund, a New York-based liberal NGO concerned with social equality. In a statement, the organisation said:

"If this legislation passes, Israel will become the only western democracy to outlaw outside funding for NGOs it designates as political."

"We call on all Israelis and lovers of Israel worldwide to reject this latest assault on the values and freedoms maintained by every real democracy."

However, Tzipi Hotovely, one of the sponsors of the bills, defended the legislation, saying that it represented a “major hurdle en route to cleansing Israel's policies from foreign influence, of the kind that do not wish Israel's favour".

"It is the right and duty of the State of Israel to conduct itself according to the will of the Israeli public, as opposed to succumbing to foreign attempts to buy influence within Israel," she said.

Member of the Knesset (MK) for Likud Danny Danon also backed the move, saying that cutting off the funding to the organisations “is a first step in removing the marginal affliction of the extreme left wing from Israeli society.”

On Saturday, The Independent reported that Matthew Gould, the British ambassador in Tel Aviv, had warned Ofir Akunis, one of the bill's authors, that the limiting of NGO funds "would reflect badly on Israel".