In an apparent reversal of policy the Government has announced two steps to make it even more difficult for councils to stop trading with illegal Israeli settlements in the West Bank.

First, the Cabinet Office is issuing advice to councils that “boycotts in procurement policy are inappropriate” unless the government has itself decided to boycott trade to a country.

Secondly, the Communities Department is making it illegal for local government pension schemes to divest unless there are already Government sanctions in place.

This comes less than a year after the Foreign Office and Business Department issued advice to UK companies that “we do not encourage or offer support .. for financial transactions, investments, purchases or procurements in Israeli settlements”.

This was in line with the policy of former Foreign Secretary William Hague of creating “incentives and disincentives” on the Israeli government to stop building illegal settlements in the West Bank.

Leicester City Council passed a resolution last year to boycott any produce originating from an illegal Israeli settlement “insofar as legal considerations allow”.

In its resolution the council “recognises the right of the State of Israel to exist in peace and free from incursion but condemns the Government of Israel for its continuing illegal occupation of Palestine’s East Jerusalem and the West Bank, blockade of Gaza and appropriation of land”.

But Leicester has been hampered by legal action by opponents trying to stop them carrying out the resolution and other councils – including Nottingham – have postponed action pending legal advice.

When the new Cabinet Office procurement guidance comes in, councillors will have to “have regard” to the guidance and will need ‘reasonable’ cause to go against it. Together with EU tendering rules, that will make it much harder to exclude companies like Veolia or G4S – at least openly – because of their involvement in the West Bank.

MPs will have no opportunity to vote on the change in procurement advice. The change to pension rules is out for consultation until February 19 and will go through Parliament on a negative statutory instrument which can only be blocked if the Opposition uses its limited parliamentary time to call a debate.