Nearly two million children a year die for want of clean water and proper sanitation while the world's poor often pay more for their water than people in Britain or the US, according to a major new report.

The United Nations Development Programme, in its annual Human Development report, argues that 1.1 billion people do not have safe water and 2.6 billion suffer from inadequate sewerage. This is not because of water scarcity but poverty, inequality and government failure.

The report urges governments to guarantee that each person has at least 20 litres of clean water a day, regardless of wealth, location, gender or ethnicity. If water was free to the poor, it adds, it could trigger the next leap forward in human development.

Many sub-Saharan Africans get less than 20 litres of water a day and two-thirds have no proper toilets. By contrast, the average Briton uses 150 litres a day while Americans are the world's most profligate, using 600 litres a day. Phoenix, Arizona, uses 1,000 litres per person on average - 100 times as much as Mozambique.

"Water, the stuff of life and a basic human right, is at the heart of a daily crisis faced by countless millions of the world's most vulnerable people," says the report's lead author, Kevin Watkins.

Hilary Benn, international development secretary, said: "In many developing countries, water companies supply the rich with subsidised water but often don't reach poor people at all. With around 5,000 children dying every day because they drink dirty water, we must do more."

Many countries spend less than 1% of national income on water. This needs to rise sharply, as does the share of foreign aid spent on water projects, the UNDP says. It shows how spending on clean water and sanitation led to dramatic advances in health and infant mortality in Britain and the United States in the 1800s.

In the world's worst slums, people often pay five to 10 times more than wealthy people in the same cities or in London. This is because they often have to buy water from standpipes and pay a middle man by the bucket. "The poorer you are, the more you pay," says Mr Watkins.

Poor people also waste much time walking miles to collect small amounts of water. The report estimates that 40bn hours are spent collecting water each year in sub-Saharan Africa - an entire working year for all the people in France.

And the water the poor do get is often contaminated, spreading diseases that kill people or leave them unable to work. The UNDP estimates that nearly half of all people in developing countries at any one time are suffering from an illness caused by bad water or sanitation and that 443m school days are missed each year.

There is plenty of water globally but it is not evenly distributed and is difficult to transport. Some countries use more than they have due to irrigation, population growth and so on. But many simply do not handle their water properly.

The Middle East is the world's most "water-stressed" region, with Palestinians, especially in Gaza, suffering the most.

Climate change is likely to hit the developing world hardest, reducing the availability of water, lowering agricultural productivity and leaving millions hungry. Changing weather patterns are already causing drought in countries such as Kenya, Mali and Zimbabwe, but wet areas are likely to become wetter still, causing devastating floods and loss of life.

It says governments need to get more water to people, either through the public sector or a regulated private sector. The end, the UNDP concludes, is more important than the means.