Diego Garcia Military Base and British Indian Ocean Territory Bill

Lord Leong Excerpts

3rd reading
Monday 12th January 2026 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for her courtesy and patience throughout this very unusual Bill and its passage through this House. I will make a few remarks on the financial costs.

The treaty makes provision for a financial agreement that requires the UK to make payments to the Republic of Mauritius for the next 99 years. The agreement is very unusual, and that is because the payments are not known. The payments are not known from year 14 for the next 85 years because the payments are linked not to events in the Indian Ocean but to UK domestic inflation. It is an extraordinarily long contract for the taxpayer to be exposed like this to UK domestic inflation.

Inflation in the future is unknown, unknowable and uncapped. That means the payments under this contract are unknown, unknowable and uncapped. Maybe the Foreign Office, in looking at the projections, imagined a very benign opportunity for UK inflation and maybe it hoped that the numbers would stay very low, but if we had inflation as high as it was in this country two years ago, at any point in the 85 years of this contract the payments would get completely out of hand and be completely unaffordable to the UK.

This is why Ministers and Parliament have been poorly briefed on the contents of the treaty and why there is this extraordinary difference between the £3.4 billion accounting valuation, which was done under the Treasury Green Book procedure for UK domestic infrastructure spending, and what this is actually going to cost. As my noble friend Lord Callanan mentioned, the Government’s own internal estimate of the cost is around £34 billion to £35 billion, which is a very substantial amount to be paying.

We might hope, at this stage of the Bill, to have some good advice from the OBR, but the OBR has been quite unhelpful to the Government—and, possibly, to Parliament—and said that it has nothing to do with this. We might hope for clarification from His Majesty’s Treasury. Of course, the treaty was not negotiated by the Treasury; it was negotiated by another department. But, in the middle of the holidays, the Chief Secretary to the Treasury slipped out an announcement on 16 December—it is on GOV.UK—to say that the Treasury would be changing its Green Book methodology. So, we can be sure that the Treasury does not even agree with the accounting valuation, let alone the actuarial true cost of this agreement.

When the Minister said to us during the passage of the Bill that the total cost was £3.4 billion—she said it to us in this Chamber—it was not correct, because the total cost is not known. That needs to be corrected in the treaty, because it is quite clear that that is the intention of the Government. The Government wish, for their own reasons, not well understood by the Opposition, to pay the Republic of Mauritius £3.4 billion. It is their intention and it appears to be their understanding—but it is not what is in the treaty.

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, this is Third Reading. Arguments made at previous—

[Noble Lords]

Oh!

[Lord Leong (Lab)]

This is Third Reading and the noble Lord is repeating what has been debated before.

[Lord Altrincham (Con)]

I will speak briefly to the rest of the amendment.

The amounts referenced in the Chamber and during the passage of the Bill have not been correct. We need to make sure that the treaty is amended to reflect what the Government’s intention is: that it should be a payment of £3.4 billion and not an open-ended economic exposure. Given the extremely unusual and long-dated nature of this contract, we need to make sure the treaty is amended to protect UK taxpayers and, indeed, to maintain confidence in the sovereign credit of the UK.