Bin bags were piling up at one end of the chaotic main thoroughfare in Shuafat refugee camp on Friday morning as shoppers walked by, stepping over a stream of wastewater trickling from a nearby drainpipe. Poor sanitation is just one of the UN-administered Palestinian camp’s problems – but things will get much worse.

Despite huge international pressure not to jeopardise the work of Unrwa, the UN Relief and Works Agency for Palestine Refugees, the Israeli parliament voted this week to ban the organisation from operating on its soil. It also declared it a terror group, in effect severing all cooperation and communication between the UN agency and the Jewish state.

At present it is unclear how the new laws, which are supposed to come into effect in 90 days, will affect aid in Gaza, where UN officials say humanitarian efforts for 2.3 million people are “completely dependent” on Unrwa staff, facilities and logistical capabilities. Another 900,000 Palestinians in the West Bank rely on the organisation for basic services, which the semi-autonomous Palestinian Authority does not have the capacity to take over, leading to fears it could collapse altogether.

“I have studied Unrwa for many years; I can emphatically say there is no alternative. It is not like other UN agencies in terms of the scope and scale of what the international community and Israel has asked it to provide while there is no solution to the conflict,” said Dr Maya Rosenfeld, a sociologist and anthropologist at the Hebrew University of Jerusalem.

“Emergency providers can step in for a short time, but they cannot replace what Unrwa does long-term. It is too big to fail,” she added.

The new bills could yet be vetoed by the prime minister, Benjamin Netanyahu, if he can be persuaded to by western allies who support Unrwa’s activities, and they will almost certainly be challenged in petitions made by human rights groups to Israel’s supreme court.

At stake are 96 schools in the West Bank serving 45,000 students, as well as 43 health centres, food distribution services for refugee families, and psychological support services, according to the agency’s website. Before the war in Gaza, it operated 278 schools for 290,000 students, ran 22 medical centres, and distributed food packages to 1.1 million people, and now serves as a crucial emergency lifeline.

The anti-Unrwa legislation, passed by a 92-10 vote in the Knesset late on Monday evening, marks an all-time low in Israel’s relationship with the UN, which it has long accused of bias.

Decades of friction came to a head in the aftermath of Hamas’s 7 October attack last year, in which Israel alleged 12 Unrwa employees took part. The agency fired several staff members as a result of an independent inquiry but says that Israel’s wider accusations that as many as 10% of its 13,000 staff employed in Gaza support the Palestinian militant group are unfounded.

If the ban is operationalised, Israel would stop issuing entry and work permits to foreign Unrwa staff, and would end coordination with the Israeli military to permit aid shipments into Gaza, in effect blocking aid delivery into the beleaguered territory.

“Hundreds of thousands of people will slip from acute food insecurity into mass starvation,” said Chris Gunness, who was Unrwa spokesperson from 2007 to 2020.

In besieged northern Gaza, where Israel last month renewed a ferocious aerial and ground offensive critics say is designed to force the estimated 400,000 remaining people to leave for the relative safety of the south, conditions are already the worst of the war to date and were on Friday described by the heads of UN agencies as “apocalyptic”. Banning Unrwa would mean the humanitarian response everywhere else in the strip would also fail, Gunness added.

“There will be no one to receive them, put shelter over their heads, provide food, water, medicine and sanitation products for women and girls. In the longer term, the 300,000 children Unrwa educates in Gaza – already deep in trauma after the most brutal civilian bombardment since the second world war – will become a lost generation … This will seriously undermine the prospects of peace in the Middle East for many years,” he said.

Israel has said it will work with international partners – who have heavily criticised the anti-Unrwa move – to “facilitate humanitarian aid to civilians in Gaza in a way that does not threaten Israel’s security”, but has not proposed an alternative aid structure for Palestinians.

In Jerusalem, if the ban went ahead, Unrwa would have to shutter its headquarters in the half of the city annexed by Israel. In Shuafat, the only one of 27 refugee camps across the Palestinian territories set up to house people displaced by the creation of Israel in 1948 inside the city limits, 16,500 people would immediately be cut off from health and education services.

“You see how things are here,” said Samer al-Qam, 47, gesturing around the chaotic street. “Unrwa runs the camp’s schools, and the health clinic. It’s a major employer. Are the Israelis going to come and do it? This is not just about Unrwa … I think it’s about getting rid of Palestinians completely.”

Aida Saleh, 67, said: “I am diabetic and I need the Unrwa clinic for my insulin. Yes, it would be better if we didn’t have to rely on it, but if Israel will not give us rights there is no other choice.”

Unrwa’s mandate is to provide life-giving services to anyone who has “lost both home and means of livelihood as a result of the 1948 conflict”, a mission widened after the 1967 war, when the Israeli occupation of the Palestinian territories began. The agency is also charged with caring for descendants of refugees; the population it serves now numbers more than 5.6 million across Palestine, Lebanon, Jordan and Syria.

From an initial focus on relief, as the decades passed Unrwa channelled its resources into education, healthcare and social services. The total regional budget in 2023 was about $1.6bn, funded almost entirely by voluntary national contributions, with the biggest donor being the US ($422m).

The dependence on the US and the voluntary nature of the funding has made Unrwa vulnerable in the past. The Trump administration cut funding in 2018, claiming other countries were not paying enough and that the agency was “a hurdle to peace”. Much of the funding gap was made up by other countries until the Biden administration resumed funding in 2021.

Several western donors suspended funding for the agency in the after the 7 October allegations, although all but one – the US – have now restored financial support.

In Israel, the wisdom of the ban has been questioned, given the Biden administration’s insistence that Israel take immediate action to let more humanitarian aid into Gaza or face punishment, such as a potential halt of US weapons transfers.

The measure is “populist” and “political” rather than a strategic attempt to combat Unrwa, Shira Efron, a senior director of policy research at the Israeli Policy Forum, told the Times of Israel.

“The country is fighting in Gaza, fighting in Lebanon; it’s finished round two in Iran, which could develop into round three; there are threats from Iraq, Syria, and Yemen; Israel is trying to keep a lid on the West Bank,” she said. “To have this legislation now misses the strategic point.”