Britain on Wednesday ruled out resettling inhabitants of the British-controlled Chagos Islands in their homeland, promising �40 million (47 million euros, $50 million) for the exiled communities instead.

The announcement marks the latest twist in a dispute following the expulsion of the Indian Ocean islands' residents in 1973 and the establishment of a vital US military base on one of its atolls, Diego Garcia.

The government also said it was renewing the agreement with the United States to host the base, which would have run out this year, until 2036.

"I am today announcing that the government has decided against resettlement of the Chagossian people to the British Indian Ocean Territory on the grounds of feasibility, defence and security interests, and cost to the British taxpayer," junior foreign minister Joyce Anelay told parliament.

"In coming to this decision the government has considered carefully the practicalities of setting up a small remote community on low-lying islands and the challenges that any community would face.

"The government has also considered the interaction of any potential community with the US naval support facility -- a vital part of our defence relationship," Anelay said in a statement.

The funding for exiled Chagossians, who live mainly in Britain, Mauritius and the Seychelles, will be available over a 10-year period and will be used to fund health and social care, education and jobs.

Anelay said the fund would also be used for a "significantly expanded programme" of visits to the Chagos Islands for the former residents.

But supporters of the Chagossians' campaign to return to their islands voiced their disappointment.

Adventurer and television presenter Ben Fogle, patron of the UK Chagos Support Association, said: "It's another heartbreaking day for the Chagossian community, who have repeatedly been betrayed and abused by their own government.

"That even now, with so many reasons to support their return, the government has failed to do the right thing, makes this a dark day in our country's history."

Poet and writer Benjamin Zephaniah, also a patron of the association, added: "Once again, the people of the Chagos Islands are met with injustice".

As its colonial empire collapsed, Britain purchased the Chagos Islands from Mauritius in 1965.

A year later Britain leased the Chagos Islands to the US for 50 years -- until December 2016.

Between 1968 and 1973 around 2,000 Chagos Islanders were uprooted, a process blithely described in a British diplomatic cable of the time as the removal of "some few Tarzans and Man Fridays".

Most were shipped to Mauritius and the Seychelles.

The strategic nature of the remote and isolated Diego Garcia base became increasingly important through the 1970s as the fall of Saigon, the Khmer Rouge takeover of Cambodia and an assertive Soviet navy extended communist influence in the Indian Ocean.

Later, it became a staging ground for the US bombing campaigns in Afghanistan and Iraq.

Today, there are estimated to be around 10,000 Chagossians and their descendants.