Sir Keir Starmer is set to sign away the Chagos Islands on Thursday and give Mauritius billions of pounds, reports have suggested. The Prime Minister will attend a “virtual signing ceremony” with officials from the Mauritian government.

The UK would give the Chagos Islands, also known as the British Indian Ocean Territory, to Mauritius and pay to lease back the US-UK military base on Diego Garcia under the terms of the plan. The Government has argued that it has to give up sovereignty over the territory because of international legal rulings in favour of Mauritius.

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Critics of the proposal have raised concerns over the cost and security guarantees linked to the initial 99-year agreement.

The Foreign Office has not released terms of the deal but it is expected to include a large up-front payment for use of the Diego Garcia base and an annual rental fee.

The Telegraph reported there will also be a new “Chagos fund”, which will see Britain contribute development funding for Mauritius.

The UK government has never confirmed the estimated cost of payments under the deal but press reports have put the figure at around £9billion.

Speaking in the Commons this week, shadow defence secretary James Cartlidge suggested the Government has delayed finalising the deal as it fears Labour MPs will not support it.

He told defence questions: “The Secretary of State will no doubt share my profound concern at reports that last week Mauritius and Russia agreed to deepen their cooperation on fisheries and other maritime issues.

“Doesn’t this show that Labour’s policy of spending billions renting back a military base we already own is not only a waste of taxpayers’ money, but a major risk to our national security?”

Defence Secretary John Healey replied: “No, it shows that when we were elected last summer we inherited a situation where there were increasing questions, increasing jeopardy over the continuing sovereignty, our operational sovereignty of that Diego Garcia base.

“That’s why we’ve been taking the action since then.”