The world’s most vulnerable people will be put at risk by Andy Burnham’s decision to use the aid budget to pay for cheaper bus fares in England, charities have said.

The prime minister announced on Wednesday that he would reduce the fare cap from £3 per journey to £2 for next year, funded mainly by changing international climate donations into repayable loans.

The switch allows the government to borrow more against those loans without violating its borrowing rules. But experts say it will also leave people in the poorest parts of the world more vulnerable to the effects of the climate crisis.

It comes after the government indicated the new aid minister, Kirsty McNeill, would not attend cabinet as her immediate predecessors had done, causing concerns it was downgrading its commitment to international development.

Andrew Mitchell, the former Conservative development secretary, said: “It’s a blow to the sector that the PM has not seen fit to put Kirsty McNeill – who knows a great deal about international development – into the cabinet, let alone attending cabinet.

“As I well know from having done the job as a full member of the cabinet and as a member attending cabinet, it would give her more clout at home in Whitehall battles and overseas.”

Joanne O’Neill, the co-director of advocacy at ActionAid UK, said: “The prime minister’s fare cap scheme is a welcome initiative but his funding proposal throws global south countries under the bus, penalising those most impacted by a climate crisis they did not create.”

She added: “Delivering international climate finance as loans instead of grants pushes countries deeper into debt and forces them to divert funding away from essential public services such as education, health and social protection – which disproportionately impacts women and girls.”

Monica Harding, the Liberal Democrat spokesperson for international development, said Burnham’s decision would “further undermine the UK’s standing as a reliable global partner”. She said: “Swapping crucial climate grants for loans will ultimately fall on the backs of the world’s poorest, racking developing nations with more destabilising debt. This will only harm Britain’s security in the long run, fuelling more migration and instability abroad.”

Romilly Greenhill, the chief executive of Bond, which represents aid organisations, said: “It is disappointing that the new prime minister is picking up where the previous one left off, by continuing to raid the diminished UK aid budget to prop up much-needed funding for the cost of living crisis here in the UK.

“The cost of living crisis in the UK needs to be urgently addressed, but robbing Peter to pay Paul is not the answer and pitches marginalised communities here in the UK against marginalised communities in lower income and climate-vulnerable countries.”

Danny Gross, a climate campaigner at Friends of the Earth, said: “With the UK already doing far below its fair share on international climate finance, funding [the fare cap] by replacing climate grants with loans is nothing short of a travesty.”

Burnham made the bus fare cap his second major policy announcement in office, a day after he said he would cut VAT on electricity bills.

During a visit to Bath, the prime minister said the move would “really help people with the cost of living pressures they’re facing”. He added: “It’s there for the whole of 2027, and I think it will put money in people’s pockets.”

Downing Street said on Wednesday the cap would cost more than £500m next year, £400m of it funded by switching international climate investment to loans.

Officials said the switch would enable the money to go to international financing schemes such as the Tropical Forests Forever Facility, an anti-deforestation initiative set up last year by the Brazilian president, Luiz Inácio Lula da Silva.

Changing donations to loans, however, means money is likely to go to countries that can repay them – which are more likely to be middle-income countries such as India or Brazil than some of the world’s poorest.

The switch could reduce the amount of money the UK gives as international aid, which the previous government promised would stay at 0.3% of national income after cutting it in half to pay for more defence spending.

Though loans can count towards overseas development spending, that will depend on the terms on which they are given. Only loans given at a significant discount to market rates will count.

Experts say some of the money is likely to have been allocated already, leaving ministers having to renege on agreed donations.

A government spokesperson said: “We are committed to spending 0.3% GNI on official development assistance. International climate finance supports a range of projects such as protecting forests and development of clean power.

“Switching a small proportion of that spending from grants to loans give us more flexible ways to tackle the climate crisis while making the best use of taxpayers’ money.”