The Government has denied claims that British aid is being used to pay salaries to convicted Palestinian terrorists.
A report published in the Mail on Sunday claims that money from the UK's foreign aid budget sent to the Palestinian Authority is handed to the Palestinian Liberation Organisation (PLO), which in turn makes payments to convicted terrorists, some in Israeli prisons, and their families.
But Department for International Development officials have hit back at the "incorrect" claims.
A government spokeswoman said: "This allegation is simply incorrect. We have extensive precautions in place to ensure that UK money does not support terror groups or organisations."
The Mail on Sunday report also claims that the Government will send the Palestinian Authority up to £25.5 million this year and that president Mahmoud Abbas - whose budget is dependent on foreign aid - has spent £8 million on a new luxury palace. Former civil servants no longer working are reportedly still collecting their monthly salaries.
MP Jacob Rees-Mogg told the paper: "This is a bad way of spending public money. So much of this money is going on deeply silly and unnecessary things."
The Government said that there were strict measures to ensure that funding was only used as intended and insisted it did not provide any funding to the PLO.
A spokeswoman said: "UK aid is spent where it is most needed and is subject to rigorous internal and external checks and scrutiny at all stages.
"The Government has realigned the UK's aid strategy, cutting wasteful programmes and making sure spending is firmly in the UK's national interest.
"Alongside an increased defence budget and the UK's world class diplomatic service, our aid programme is helping to create a more prosperous and stable world in which the UK can stand tall and flourish.
"This is an approach that works; it has helped reduce the threat to the UK from Ebola in west Africa, it is targeting the root causes of the migration crisis, and it is increasing economic prospects in fragile states to counter extremism and help build our future trading partners."
The Mail on Sunday has launched a petition calling on the Government to scrap the law requiring the UK to spend a fixed 0.7 per cent of national wealth on foreign aid.