UK-Mauritius Agreement on the Chagos Archipelago

Lord Altrincham Excerpts

Monday 30th June 2025 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for listening so carefully and attentively to this wide-ranging debate, and the noble and learned Lord, Lord Goldsmith, for his report. Both reports are carefully written and carefully judged, even if many of us disagree with the conclusions the Government have reached; but they are carefully presented. Both reports indicate that the Government had discretion over this treaty. The International Agreements Committee uses the word “compromise”, which is a good way of looking at it, and the International Relations and Defence Committee uses the expression “a political choice”. The discretion is very wide in a situation like this, such that the Government could give territory without money or money without territory.

Indeed, we might look at this from a financial standpoint in the context of many other situations where we choose to make financial transfers—for development, for defence, for friendship, and for other reasons. In this case, concerning the economic agreement with the Republic of Mauritius, the generosity that this Government are showing towards Mauritius might come as a surprise to many citizens of this country.

Mauritius is not a poor country; its GDP per capita is comparable to that of Brazil and Mexico. In relation to other Commonwealth islands such as Saint Vincent, Jamaica and Fiji—beautiful islands with beautiful beaches, which we know are interesting to lawyers from this country—Mauritius is quite a bit richer. Mauritius benefits from a low tax rate. It has a tax-to-GDP ratio of around 20%; we are well past 30% in this country. That is good news for the citizens of Mauritius as well as for UK non-doms and non-resident Indians who choose to make their tax residency in Mauritius.

With a low tax rate, Mauritius is running a deficit, but the useful thing for Mauritius is that just the initial payments in this remarkable agreement cover the Mauritius deficit in full. And it gets better because, depending on how the calculation is made for the overall cost of this agreement, depending on how a future Government choose to settle out that cost—maybe capitalise it, pay it off, or however they meet it—and depending on how the future cost is calculated and settled, Mauritius may be able to repay some or all of its national debt.

Regardless of the merits of giving away territory, which we have heard about in this debate, the Government should not be making payments of this kind. That is because we are deficit-financing our own public expenditure. The money that we are going to be paying to Mauritius will not come from our taxpayers. Our taxpayers are not even able to fund the Government as they are currently spending within this country. The money we will pass to Mauritius will be borrowed. It will be borrowed from people who are lending to the British Government—savers and pension funds. The people who lend money might be surprised that the money they are lending to His Majesty’s Treasury is going to be passed to the Republic of Mauritius. Maybe we should be a little clearer with them about what is going on.

We could ask the Government to name one of the upcoming issues made by the British Government a Chagos bond. Then, when it comes up for repayment at redemption, in 2049 or 2053, we will all be able to remember what it was about. We were borrowing money to pass to Mauritius.

The Government have at any one time a variety of contingent financial liabilities: items that we would prefer to defer, items that should not be paid for now. A good one to compare this to would be the decommissioning of North Sea oil—that is about removing all the equipment in the North Sea. It will be extremely expensive; it is well worth not paying for it any time soon. But the difference is that, when we come to do that decommissioning, the money will be spent within the United Kingdom. It will create thousands of jobs. It will create a degree of economic demand within the UK. That is not the case when we pass money to Mauritius. It is specifically not the case because, within the agreement, we even prioritise economic activity for the benefit of Mauritian contracts and Mauritian employees in the military base, so the priority of this economic agreement is favoured the other way around.

This whole agreement speaks to a weakness in financial control for the Government and for His Majesty’s Treasury. We need better guardrails and better supervision of financial decisions of this type in Parliament.