Diego Garcia Military Base and British Indian Ocean Territory Bill

Lord Altrincham Excerpts

2nd reading
Tuesday 4th November 2025 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for her patience in hosting this debate and welcome the Chagossians who have joined us this evening—they are very welcome in our House.

I start by noting that some matters are not obvious because they are not obvious, and this one is really quite a complicated story to explain. It was interesting to hear how the Minister was able to explain it, in a sense tactfully, because it involves at least three countries, the rights of individuals, a wide-ranging view on legal matters and interpretations, and environmental issues. And only then do we get to the defence issues and, finally, to a very large amount of money.

To understand why we are paying out so much money, we need to understand why the agreement is in the form it is. That always goes back to the claim on sovereignty and the Government’s anxiety over the legal risks. The Minister in the Commons, just like the Minister this evening, referenced once again the International Agreements Committee report from the noble and learned Lord, Lord Goldsmith, and the statement in that report—the report is very carefully written—that if agreement was not reached then there would be some risk to the base. We always hear this. The Government do not like to quote the other statements made in the conclusion of that report, where it says that the findings in 2019 were non-binding. It also notes that the treaty does not make appropriate provisions for the Chagossians and concludes with an observation that the treaty is a compromise. That is a good word to describe the situation the Government are in: it is some kind of compromise.

Indeed, our colleagues on the International Relations and Defence Committee, chaired by the noble Lord, Lord De Mauley, struggled with the legal position here. They heard lots of legal opinions and they were not able to reach any conclusion. They said there is a wide range of opinions, and came up with the language that it was a political decision. Again, that is a fair way of describing it: we have a compromise for political reasons in the judgment of the Government.

We would expect the financial part to reflect the spirit of that—a spirit of compromise and of a rather complicated story. However, when you get to the financial part of this agreement, you find that, in fact, it is a great deal of money. My noble friend explained the initial payments, but the Government like to talk about an amount of £101 million, in this discounted, not-real-money way. The initial payments, incidentally, are over £200 million a year. The Government always go back to try to justify why we are paying this rental fee. They say, with great triumph, that there is precedent —we heard this in the House of Commons—in the example of France paying €85 million a year for a military base in Djibouti.

Of course, it is extremely unlucky to justify British public spending with reference to French public spending, but, putting that aside, the Minister in the House of Commons was probably not aware that the whole idea of introducing Djibouti came from the Mauritians. They introduced it because they wanted to introduce the concept of an open market rent—this had to be on an open market basis. But this situation is not even beginning to be on an open market basis. As we have just discussed, it is a very complex compromise. We should never have accepted the comparison to the Djibouti example at all and should never have started from that position. With a moment’s reflection—just a moment’s reflection—we find that the UK is in no position to seek an open market rent for an American military base. It is preposterous. It is not even beginning to be an open market situation.

Then we get to the overall economics of the situation. The Government love talking about this number of £3.4 billion. It is a great deal of money for those who do not really wish to pay any money for this. Unluckily for the Government, they do not seem to understand the financial risk of the contract, which could be for a great deal more. The reason for that, as we have heard, is that in the contract there is an inflation ratchet from year 14 to 99. It is not a question of how we account for it today; it will be real money that flows out. The ratchet starts in year 14, so quite soon.

The reason that matters is that a future Government will almost certainly need to retrade this situation, for reasons that we do not know today. What they will find is that the Mauritians do not see the contract the same way—they do not account for it the same way. They will see an extremely valuable exposure to UK inflation. The Government do not seem to understand the risk in their own contract. Could the Minister report to the House whether the value of this contract is actually £3.4 billion—that is, the capped value—with no further exposure above £3.4 billion? It is extremely important that the Government find a way to cap this exposure, because if it rolls any longer then it will be locked in as being uncapped. That will create a frightful row in the future between the UK and the Republic of Mauritius, but we are trying to settle rows between the two countries. We do not want a misunderstanding of the value of the contract.

Finally, I add one other important thought, because we are deficit financing the Government at the moment. It is very burdensome for the Government to pay money out of the country to another country. The Government like to point out that some public expenditure creates domestic stimulus. That itself will always be argued over, because some people will say there is too much waste and that the spending is inefficient. When the Government waste money domestically, there probably is some level of domestic stimulus, but when the money is sent to the Republic of Mauritius, there is not any. It is worse than that because, in addition, the money is not being spent on the military base and the treaty provides for priority to Mauritian contractors and Mauritian workers—there are no jobs for people from the UK in this. It is a straight loss out of the UK. It is particularly burdensome.

The treaty amounts to a shakedown of UK taxpayers by the Republic of Mauritius. In addition, it points to weakness in financial controls at His Majesty’s Treasury and by the Government. It may in due course create great misunderstanding if the Government have not properly appreciated the inflation exposure that they have in the contract. A future Government will meet that exposure with dismay, and future taxpayers will be taking the cost of it.