How much will the Chagos deal cost?published at 16:23 GMT
Ben Chu
BBC Verify policy and analysis correspondent
On BBC Radio 4's Today programme this morning, Foreign Secretary Yvette Cooper was challenged over the cost of the deal that will see the UK transfer sovereignty of the Chagos islands to Mauritius and lease back the largest of the islands which houses the Diego Garcia UK-US military base for 99 years.
The Conservatives have claimed the agreement will cost the UK £35bn, but Cooper said such figures were “wrong” and the actual figure was “much smaller”.
The government has previously claimed the cost is £3.4bn.
The Conservatives are not wrong in pointing out the cumulative value of the annual outlay in cash terms over the 99 years of this deal could easily add up to £35bn.
The government has reached its significantly lower figure by adjusting these cumulative payments for:
- Future inflation
- Something called “Social Time Preference” - the value society attaches to something in the present compared to the future, so the future costs and benefits are discounted to their present value
The inflation adjustment is valid. A payment of £1bn in 2124 will be considerably less onerous for a future government than a payment of £1bn made in 2025, given the likely growth of the economy and tax revenues over a century.
Also, given the extremely long timeframe of the deal, analysts and actuaries consulted by BBC Verify say it is not unreasonable for the government to further discount the payments for Social Time Preference - given that studies of economic behaviour show immediate costs and benefits are valued more highly than future costs and benefits by individuals, businesses and governments., external


















