Abu Hamza al-Masri, 46, the former imam of Finsbury Park mosque, had been refused public funds for his appeal against the Home Secretary’s removal of his British citizenship.

But The Times has discovered that a three-member legal panel has overturned that decision and declared that Abu Hamza is entitled to taxpayers’ money to pay for legal representation.

The cost of leading counsel and solicitors to represent him during the three-week case, which begins next Monday, could run into tens of thousands of pounds.

The Treasury may, however, try to veto any payments to Abu Hamza as a breach of UN sanctions against al-Qaeda and the Taleban.

The Egyptian-born cleric, who claims to have lost both hands and an eye during the Mujahidin campaign against the Soviet invasion of Afghanistan, has been told he must apply to the Treasury for a special licence to receive legal aid because he is named on a UN Security Council list as an al-Qaeda associate.

If the Treasury refuses, Abu Hamza could seek a judicial review, further delaying David Blunkett’s attempts to revoke his citizenship. It is a year since the Home Secretary used new powers to remove Abu Hamza’s citizenship because his activities were deemed “seriously prejudicial” to British interests.

Abu Hamza, who is wanted in Yemen on terrorist charges, appealed to the Special Immigration Appeals Commission, but the case was delayed by wrangles over legal aid.

Last month he won a High Court action against the Legal Services Commission, which had initially denied him funding alleging that he had refused to co-operate with inquiries to establish his income. A judge ordered Abu Hamza’s application for funds to be referred to a review committee which met in secret and has ordered the commission to declare him eligible for aid.

The commission said the committee’s decision was binding. A spokeswoman said: “We cannot differentiate between applicants for legal aid on the grounds that a decision to grant funding may be unpopular in a particular case.”

Abu Hamza has been on the Security Council’s list of al-Qaeda and Taleban supporters since April 2002. The list states that he is also known by his birth name, Mostafa Kamel Mostafa, and the alias Adam Ramsey Eaman.

He was banned from preaching at the North London mosque after a Charity Commission investigation. The building has been boarded up since a police raid last year.

Abu Hamza continues to preach his brand of fundamentalist Islam and political extremism to about 200 followers on the street outside every Friday. A number of Islamist terrorists and Britons who went to fight with the Taleban in Afghanistan are known to have worshipped at the mosque.

Arani and Co, the firm of solicitors which has represented Abu Hamza in the past, earned more than £210,000 in legal aid fees during 2000, the commission confirmed.

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