Britain’s plan to hand sovereignty of the Chagos Islands to Mauritius when China is strengthening its influence in the Indo-Pacific is an act of “absolute insanity” – a former prime minister of Australia has warned.

Tony Abbott – who demonstrated in support of the Falklands campaign when a student in Oxford – is appalled that the UK could surrender “perpetual control” of the territory.

He fears that if Vladimir Putin wins in Ukraine then other large “bully” states will turn on their neighbours and warns against giving China a new “opening” in the Indian Ocean.

“The Falklands were sized by the Argentines,” he said. “In this case, Diego Garcia is being surrendered by the current British Government.

“Look, I think this is an act of monumental folly… This is an act of absolute insanity.

“Apart from the fact Britain has far better things to spend the money on, apart from the fact that Britain should not put at risk its perpetual control of this important territory, why would you give China, the West’s great strategic competitor, an opening given the fact that China is always attempting to suborn these small island nations?”

Shadow Foreign Secretary Dame Priti Patel said: “Labour’s desperate attempts to surrender the Chagos Island are deeply damaging to this country’s standing on the world stage. In paying billions of pounds of taxpayer cash to giveaway the national security of us and our friends and allies, this government is making it clear that it cannot be taken seriously, and will roll over rather than stand up for Britain.

“Keir Starmer and David Lammy should scrap this whole sorry affair before it is too late.”

Her alarm is echoed by former UK secretaries of state for defence.

Sir Gavin Williamson said: “What the Government is doing is absolute madness and a strategic folly of monumental proportions. We’re looking literally having to borrow billions of pounds and tax our population in order to hand over such a strategically important and valuable base.

“It is effectively the world’s most secure aircraft barrier which allows you to have an influence on the Indian Ocean. There is no logic to what the Government is proposing to do from a military, security or world and national interest point of view.”

Fellow former Defence Secretary Sir Liam Fox said: “This is a Government of serial betrayals. Pensioners, farmers, Brexit and now our strategic interests and the security of Britain and her allies.

“Who can trust them ever again?”

The Labour Government announced in October it would give Mauritius sovereignty of the Chagos Islands, home to the Diego Garcia US-UK military base. Under the arrangements, Britain would make payments for a 99-year lease over the base.

More than 1,000 people were evicted to make way for the base. Mauritius insists the islands are its own and a United Nations advisory court ruling stated that British administration of the territory is “unlawful”.

A Foreign Office spokesperson said: “The Chagos Islands deal is paramount for our national security. The deal secures the joint UK-US base on Diego Garcia and without it, the operation of the base is at risk.

“This includes a buffer zone around Diego Garcia in which nothing can be built or put in place without UK consent and a comprehensive review mechanism to ensure no activity in the other islands can threaten base operations or security.”

Alan Mendoza of the Henry Jackson Society foreign policy think tank said: “The British Government is pretending that the surrender of the Chagos Islands is a legal matter, when in fact it is a question of political will… So rather than scuttling, Sir Keir Starmer should summon up the spirit of Britannia and remind the world that as a long established democracy and global power, we will determine our own course of action when it comes to issues that affect our national security and defence of our interests.”