Report from the ground on the effects of Israel starving the PA of cash.

The full force of Israel's withholding of Palestinian Authority (PA) tax money is being felt by Palestinians in the West Bank this week. We spoke to a Palestinian from Hebron who told us how this was affecting the society, as well as his views on what the future holds.

He said, "The most important impact has been on health and education." West Bank schools have closed, as have hospitals and medical centres, and there's no medicine for ill people anyway. The Ministry of Education have asked teachers to pack a week's worth of lessons into three days, but kids still can't take exams they were due to sit.

State employees received no salary for last month, and will receive half their salary on Tuesday next week, after the Arab League nations have just agreed (at the time of writing) to give the PA $100 million. As most people spend half their monthly income on paying off bank loans and mortgages, this means the 50 per cent they do get hold of they have to give straight back to the banks. People can't get to work because they don't have the money to get there.

PA tax money currently is collected by Israel, who then give it back to the PA, thanks to a particularly pernicious agreement within the Paris Protocol. This covers all taxes as well as arbitrary charges, such as 30 euros each for anyone crossing the borders of occupied Palestine.

Israel are currently withholding all the PA's funds to punish Palestinians for being granted observer status at the UN. They started two months ago, but just two days ago the authority ran out of cash, causing chaos for all state-run services and employees who make up a large majority of the Palestinian workforce. To add insult to injury, the PA has also lost much of its international support since the vote went in it's favour, and not just from usual suspects like the US but, more inexplicably, from other Arab countries too.

The great idea of Head of Ministry Salam Faiyd has been to tell people to boycott Israeli goods, but it was quickly pointed out to him that no-ones got money for anything, Israeli or Palestinian, as things stand.

Is the point of this to cripple the Palestinian economy? Our correspondent says not: "We don't have an economy anyway... They are just pressuring the PA and the people so they don't go further, for example for full statehood at the UN. It's the same with checkpoints - making us wait five or six hours there. It's about controlling the people."

This isn't the first time that Israel has kept Palestinian money with dire consequences. In 2006, the PA was starved of money for a whole year after Hamas won the election. Vital services such as schools were only kept afloat by wealthier Palestinians offering to pay small salaries to teachers.

No-one knows how long the current stand-off is gonna last, but the situation's looking bad. For most people living in the West Bank, the most pressing concerns are about day to day existence: finding food for themselves and their family, getting money to get by. In 2006, people found ways to pull together. In the run up to Eid, when parents want to buy children new clothes and couldn't afford too, shopkeepers would give them what they needed on the basis of an I.O.U.