The Chagos Islands deal just gets worse and worse

Spectator

2 days ago

There has always been something mad about the government's deal over the Chagos Islands. The British Indian Ocean Territory was formed in 1965 from the seven atolls of the Chagos Archipelago and over 1,000 smaller individual islands. They had previously been administered as part of the Crown Colony of Mauritius, a British possession since 1810. Mauritius became independent in 1968 and had long claimed sovereignty over the BIOT, which the United Kingdom had consistently rejected and which has never been upheld by a judgement in any international court.
Last year, however, the government reached an agreement with Mauritius to surrender sovereignty of the BIOT while retaining control through a 99-year lease of the military base at Diego Garcia, formally leased by the United States from the Ministry of Defence as Naval Support Facility Diego Garcia. After some subsequent renegotiations, a final agreement between the UK and Mauritius was published in May. As well as surrendering sovereignty, the government will pay on average £101 million a year for the lease of Diego Garcia, and it gave an overall estimated cost of £3.4 billion.
So let us be quite clear about this aspect of the deal: the UK is giving away sovereignty it has exercised for more than two centuries to a country 1,250 miles from the BIOT, which has never held independent jurisdiction over the Chagos Islands and has no historical or cultural connection to them save through British and previously French administration. It is doing so because, in the Prime Minister's words: 'If Mauritius takes us to court again, the UK's longstanding legal view is that we would not have a realistic prospect of success.' And we are paying billions of pounds to induce Mauritius to accept this surrender.
A price tag of £3.4 billion to prevent the upholding of a largely spurious claim in a politicised court on the bogus and nebulous grounds of 'decolonisation' is a high one, and the government has rightly been criticised for an abject and weirdly slavish sacrifice on the altar of international law. Sir Keir Starmer and his attorney general, Lord Hermer, regard the messy and often highly partial notion of international courts as sacrosanct; for them, this is simply the price that must be paid to be good global citizens.
It now seems that the price may be higher than admitted; much, much higher. The Daily Telegraph has obtained documents under the Freedom of Information Act which purport to show that the Government Actuary's Department initially estimated the nominal cost of the agreement to be £34.7 billion. This was reduced to £10 billion by applying an assumed annual inflation rate of 2.3 per cent over the 99-year lease period (it is currently 3.6 per cent, so that is ambitious).
The total was then lowered again by between 2.5 and 3.5 per cent per year by the application of a Treasury practice called the Social Time Preference Rate; this represents the fact that people value benefits received immediately more highly. It therefore converts future costs and benefits into their present-day value. The Foreign, Commonwealth and Development Office argues that this is a 'standard' calculation for long-term government spending and there has been no attempt to deceive or mislead.
Up to a point, Lord Copper. The Telegraph notes that this calculation was not applied, for example, to the Social and Affordable Homes Programme announced last year by deputy prime minister Angela Rayner. She could therefore promote a spending commitment of £39 billion, maximising rather than minimising the headline figure.
The government needs to deal with this quickly. It is hard to avoid the conclusion that it has been guilty of at least sharp practice, seeking radically to underplay the costs of a very bad deal. Remember that Starmer dismissed suggestions that the total bill might be between £9 and £18 billion as 'absolutely wide of the mark'.
This kind of actuarial legerdemain, shuffling figures to say, in effect, that two plus two does not have to equal four, is shoddy and underhand. And the government has no reservoir of goodwill from which it can draw. In order for the treaty to come into force, parliament will have to agree the Diego Garcia Military Base and British Indian Ocean Territory Bill introduced in July. The overall cost must be a vital part of that debate and parliament would be perfectly entitled to reject the bill.
It is mad enough to be spending £3.4 billion giving away British sovereign territory. To pay 10 times that, and to work hard to minimise the published figures, is beyond madness. £34.7 billion is more than half the UK's annual defence budget. This is not Sir Keir Starmer reluctantly paying some modern-day Danegeld; instead he seems to have flung handfuls of cash at the Vikings before they ever set sail.