A former Foreign Office official has urged Sir Keir Starmer to reject demands from Mauritius for more money in talks over the Chagos Islands.

Lord Simon McDonald, who advised foreign ministers for five years under the Tories, warned the Government not to agree to hand over what has been described as “crazy money” to get a deal over the line before Donald Trump returns to the White House.

Mauritius is reportedly asking for £800 million per year and billions of pounds in reparations to secure a major US-UK airbase on one of the islands when it takes control of the territory.

The UK Government has said it will provide a package of financial support to Mauritius as part of the deal, but so far has refused to say how much it has offered to guarantee the future of the base on Diego Garcia.

It has now been claimed that Mauritius is asking for “crazy money”, with a source telling The Sunday Times: “They were talking £800 million a year for as long as we wanted to keep the base there, plus billions of pounds in reparations.”

The reports threaten to further rattle the deal struck by Labour shortly after the election to hand the islands to Mauritius.