Sir Keir Starmer‘s deal to hand over the Chagos Islands will fund sweeping tax cuts in Mauritius, it has emerged.
The Prime Minister last month signed an agreement to cede sovereignty of the stretegically-important Indian Ocean archipelago to Mauritius.
The deal will see the UK lease back a military base on Diego Garcia, the largest of the islands, with Britain paying Mauritius an average of £101million a year for 99 years.
Sir Keir said the ‘net cost’ of the agreement will be £3.4billion, after adjusting for factors including inflation. But opponents said the true cost is ten times as much.
According to The Telegraph, Mauritius will use almost £500million of the payments to help clear its national debt.
This will allow the east African country to abolish income tax entirely for 81 per cent of employed Mauritians and raise minimum salaries.
It has also been pointed out how, under the Chagos Islands deal, UK taxpayers are now funding more than 4 per cent of the Mauritian government’s total budget.
It comes amid warnings that Britons face fresh tax rises when Chancellor Rachel Reeves unveils her next budget in the autumn.
Sir Keir Starmer’s deal to hand over the Chagos Islands will fund sweeping tax cuts in Mauritius, it has emerged
The PM said the ‘net cost’ of the agreement with the Mauritian government, based in Port Louis (pictured), will be £3.4billion. But opponents said the true cost is ten times as much
Navin Ramgoolam, the Mauritian PM, announced the tax changes in a budget speech last Wednesday
A black hole in the public finances has been left by Ms Reeves’ humiliating U-turn on axing winter fuel payments for pensioners.
The Chancellor is also under intense pressure from Labour MPs to splurge more by abolishing the two-child benefit cap.
Navin Ramgoolam, the Mauritian PM, announced the tax changes in his own budget speech last Wednesday.
He said the UK’s payments from the Chagos deal for the next three years would be used to help pay off his country’s national debt, which has reached 90 per cent of GDP.
Mauritius is also poised to raise the minimum salary before an employee pays income tax to £8,073 a year, which will scrap income tax entirely for 44,000 people.
‘As a result of the measures I have introduced, 81 per cent of employees in our country will not pay any income tax,’ Mr Ramgoolam said, according to the newspaper.
Tory leader Kemi Badenoch said: ‘Labour have lost control. They’ve raised taxes on working families. Businesses are closing. People are losing their jobs.
‘Labour’s answer: fund a tax cut for…Mauritians. They are not on your side.’
The deal will see the UK lease back a military base on Diego Garcia, the largest of the islands, with Britain paying Mauritius an average of £101million a year for 99 years
Dame Priti Patel, the shadow foreign secretary, said: ‘The only people benefiting from Labour’s higher taxes are the people of Mauritius.
‘While causing a financial black hole in Britain, whacking up our taxes and planning further tax raids, Labour’s Chagos surrender deal means families in Mauritius will see their taxes cut at our expense.
‘This is an insult to hard-working British people who have once again been betrayed by Keir Starmer with millions more paying more in tax.’
Dame Priti also highlighted Mauritius government documents that showed how the UK’s Chagos payments are set to make up more than 4 per cent of the country’s budget this financial year.
The Foreign Office has been approached for comment.
