All British governments, whether of the Right or the Left, have taken a positive view of Israel. There is the historical fact that Britain signed the 1917 Balfour Declaration and was the imperial power that handled the so-called Palestinian mandate after the First World War.

Britain therefore played a greater role in the formation of the Israeli state than anyone else. In recent decades, a further factor has come into play. Successive prime ministers have resolved never to challenge the foreign policy of the US, while Washington in turn has forged an unshakeable alliance with Israel.

This has made Britain, by proxy, Israel's second closest ally. Events in recent years, however, have made this state of affairs anachronistic and embarrassing. It is not just the deplorable events in Gaza.

The fulcrum moment came just over four years ago, with the Israeli invasion of Lebanon. Approximately 1,200 Lebanese were killed, including many women and children.

Yet Britain, following the lead of the US, refused to call for a ceasefire, let alone condemn Israel's actions. Two years ago, when Israel moved in on Gaza, the British and American response was almost as muted. And over the past few months, Israel has continued to build colonies on the West Bank and in occupied east Jerusalem.

Israeli Prime Minister Benjamin Netanyahu has chosen to turn his back on the world. As a result, the Middle East peace process is dead, and the prospect of an independent Palestinian state has vanished.

Meanwhile, US President Barack Obama, who alone possesses the means to put real pressure on Israel, appears paralysed. In a stunning abrogation of duty, he and his Secretary of State Hillary Clinton, have effectively left the Middle East to its own devices.

This situation creates an urgent problem for the British government. The traditional British response of aligning themselves with the US is, of course, still available — and has its supporters in the heart of government.

But in the light of the events of the past few weeks, it has become a policy that carries moral and other costs. It means sharing complicity, alongside the US, for the colony building, the prison state that now prevails in Gaza, and for Obama's gutless abandonment of the search for peace. The Cabinet is split three ways, and it should be said that some of the most powerful ministers are with Netanyahu and the US.

George Osborne made an extraordinary speech recently at a dinner for the 250th anniversary of the Board of Deputies of British Jews. The Chancellor, whose speech was cleared by the Foreign Office reaffirmed the official position, which demands a halt to the colonies.

But his speech was laden with pro-Israeli rhetoric; there are no signs that Osborne, any more than Obama, would support any kind of sanctions that would force the Israelis back into the international community.

Many Lib Dem ministers, however, take exactly the opposite position — fiercely critical of Israel and supportive of the Palestinian cause. Before the election, the party was a powerful supporter of Palestine; indeed, Nick Clegg was the only leader to speak out strongly against the invasion of Gaza.

Opposition

These views have not changed in office: privately, Clegg is urging Britain to ditch its recent subordination to the US and run an independent Middle Eastern policy. He and Jeremy Browne, the lone Lib Dem Foreign Office minister, are also coming under pressure from party activists. Though this sentiment has been contained so far, it is bound to burst into the open soon.

This brings us to David Cameron and William Hague. The prime minister and foreign secretary are not ardent Atlanticists. Nor are they as openly pro-Palestinian as Clegg and his men.

However, Cameron does want to use Netanyahu's intransigence over the colonies to open clear blue water between Britain and America. I am told that privately, he was very supportive when Hague angered Netanyahu by meeting Palestinian activists on his trip to Israel in the autumn.

Now it is reported that the foreign secretary, who friends say is determined to make progress in the Middle East, is planning to enhance the status of the Palestinian diplomatic mission in London. This follows a similar move by the French over the summer, and is bound to annoy the Israeli government.

Yet it is purely symbolic. A much tougher and more practical set of measures was set out three weeks ago in an open letter to the European Commission from a group of former EU bigwigs, including Chris Patten.

This important document argued that the EU should not renew its existing trade deals with Israel so long as it continues to violate international law. The authors of this letter believe that taking such robust steps would not alienate the US — in fact, it would help Obama, by providing a counterweight to the Congressmen and Senators who are determined to block progress towards peace.

The Lib Dems would be very happy indeed to back strong measures like these, and it will not be long before they start to call for them openly. It may not be on many people's radar, but Middle East policy has the potential to split the Coalition wide open.