DEVELOPMENT Secretary Penny Mordaunt will today reveal a ground-breaking plan to slash billions in taxpayers’ contributions from the bloated aid budget.

In a radical shake up of DFID spending, the new Cabinet minister wants private investors such as pension funds to prop up Britain’s generous overseas programmes instead.

The nation will still meet the controversial target of 0.7% of its annual income on foreign aid.

But the Government wants to enforce a major change to international rules to allow non-government cash also to be used to meet the target, under Ms Mordaunt’s blueprint.

In a major speech today, she will argue that the shake up is the only way to make Britain’s massive £13bn aid budget sustainable for the long-term with pressure increasing on Treasury coffers.

A source close to the Development Secretary said: “How we do aid is changing. It’s now much more about projects that help a country’s economy, which means there is an opportunity there for private money to make a return.

“Penny believes that means when investors step in, the taxpayer can step back, freeing up billions to spend elsewhere in government.”

The key to the plan’s success is persuading the Organisation for Economic Co-operation and Development international watchdog to reform tight rules about what currently constitutes aid spending – officially known as Official Development Assistance (ODA).

Ms Mordaunt – seen as a potential Tory leader of the future - is also expected to make clear today that the government will work with the OECD for reform.

But she will also reserve the nation’s right to act unilaterally if the watchdog refuses the changes, as other countries such as the Netherlands already have.

Ms Mordaunt’s plans have already won the backing of Chancellor Philip Hammond, The Sun has also learned.

But they won’t come into effect for four years, as the government will stand by the current aid projects that it has already committed to.