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.”

Single bus fares across England will be capped at £2 from January, the prime minister, Andy Burnham, has announced.

The nationwide cap is currently set at £3 until the end of March 2027 although some areas – including London and Greater Manchester, where Burnham set a £2 limit as mayor – have lower top rates for single tickets.

The measure, which will apply across England except London, is backed by £454m of funding, including money to allow devolved governments to take similar action.

About £400m of that funding will come from switching investment in international climate finance to loans, with the rest from savings in the Department for Energy Security and Net Zero budget.

The total cost of the scheme is expected to be more than £500m, with the rest coming from Department for Transport funding already allocated to buses.

The £2 cap will be in place throughout 2027 and reverses an increase put in place by Keir Starmer and Rachel Reeves in 2024.

A £2 cap had been in place between January 2023 and December 2024 but the incoming Labour administration argued it was not affordable, although some metro mayors, including Burnham, decided to fund an extension of the lower limit in their areas.

Burnham said: “Good, affordable transport links are an essential. No one should be priced out of those and left behind.

“But for too long people have said that cheaper transport isn’t an option. I don’t accept that. I’ve done it before and I will do it again now: a £2 cap on bus fares for millions across the country.

“Lower fares will help people get to where they need to – giving them breathing space to help with the cost of living.”

The measure is backed by £454m of funding, including money to allow devolved governments to take similar action.

The chancellor, John Healey, said millions of people would benefit from fares being slashed by a third and insisted the measure could be paid for. “This action to ease the cost of living is funded by savings made elsewhere, so there’s no burden to British taxpayers, just pounds going back into their pockets,” he said.

The transport secretary, Heidi Alexander, said the move would make “everyday journeys easier and cheaper”.