What does the Chagos agreement actually cost?
The UK will pay Mauritius rent for a military base for 99 years. You can describe that bill as £35 billion or £3.4 billion, and both are correct.
What is the UK committed to paying under the 2025 treaty with Mauritius, on which accounting basis, over what period, and against what baseline?
Part 1
What this is about
The Chagos Islands are in the Indian Ocean. In May 2025 the UK agreed to hand them over to Mauritius. The UK keeps one island, Diego Garcia, where there is a military base, and pays rent for it for 99 years.
Nobody disputes what the payments are. The row is about how to add them up. Add every payment as it is paid and you get about £35 billion. Count the same payments in today’s money and it is about £10 billion. Use the Treasury’s standard method for long-term costs and it is £3.4 billion.
The gap comes from time. Over 99 years prices rise a lot, so a payment made decades from now will buy far less than the same sum does today. The Treasury also treats money in the far future as worth less to us now. This is called discounting, and it shrinks the total.
All three numbers are correct. Each answers a different question. The problem starts when one of them is quoted without saying which one it is.
99
Years of the lease, extendable by a further 40 if both sides agree
Commons Library, Sept 2025
£101m
Average annual cost in 2025/26 prices, verified by the Government Actuary’s Department
Commons Library, Sept 2025
10×
Ratio between the highest and lowest published total for the same commitment
£34.7bn vs £3.4bn
Explainers
Explainer video
The Chagos deal costs £35 billion. Or £3.4 billion. Both are true.
Summary infographic
What does the Chagos deal really cost?
The UK will pay Mauritius rent for the Diego Garcia base for 99 years. The row is about how to add it up.
£34.7bn — Cash paid over 99 years — Full Fact
£10.0bn — The same payments in today’s prices — Full Fact
£3.4bn — Discounted to present value — Government Actuary’s Department
£101m — Average a year in today’s prices — Commons Library
The trick: Adding up 99 years in one number
Most spending figures you hear are for one year, in today’s money. Put a 99-year cash total next to them and the deal looks many times bigger than it is.
The true cost of the Chagos deal is £35 billion.
All three totals describe the same rent payments.
They differ only in how the money is counted.
Before the deal, the UK paid no rent at all.
All three totals are correct. The trick is quoting one without saying which. Before the deal there was no rent at all.
Part 2
What's being said
“The true cost of the Chagos deal is £35 billion.”
Conservative Party, from Government Actuary’s Department figures, August 2025
How it was used
Quoted by the Conservatives in August 2025 as the “true cost” of the deal, using cash figures from the Government Actuary’s Department.
How it could mislead
Set beside spending counted one year at a time, a 99-year cash total makes the deal sound many times bigger than any yearly budget.
What the figures say
Correct as a cash total over 99 years. But it can’t fairly be set beside yearly figures in today’s money, and other long-term government deals aren’t usually described this way.
“The net overall cost is £3.4 billion over 99 years.”
Prime Minister, press statement, 22 May 2025
How it was used
Used by the Prime Minister in the statement announcing the deal, where it was called the “net overall cost”.
How it could mislead
The label sounds like a simple total. It doesn’t say the figure was discounted, which makes it the smallest of the three ways to count the same rent.
What the figures say
Correct using the Treasury’s usual method, which shrinks future payments. But calling it the “net overall cost” didn’t tell people it had been discounted. That was the statistics watchdog’s one complaint.
“The £35 billion figure is incorrect.”
Defence minister, written answer, 19 November 2025
How it was used
Used by a defence minister in a written answer to Parliament, to dismiss the higher figure.
How it could mislead
It suggests £35 billion was made up. The Ministry of Defence itself accepts it is right as a cash total.
What the figures say
The Ministry of Defence later accepted that £35 billion is right as a cash total. So calling it incorrect doesn’t hold.
“The costs represent less than 0.2% of the annual defence budget.”
UK government, cited in the Commons Library briefing, September 2025
How it was used
Used by the government to show the payments are small next to defence spending.
How it could mislead
One year against one year sounds reassuring, but it hides that the payments carry on for 99 years.
What the figures say
This compares one year’s payment with one year’s budget, which is fair as far as it goes. It leaves out that the payments carry on for 99 years.
Part 3
What the figures show
What the statistics watchdog said
The Conservatives complained to the UK Statistics Authority about the £3.4 billion figure. The watchdog did not say the number was wrong, and noted the Treasury’s discount rate is a reasonable one to use.
Its one criticism was the label. Calling £3.4 billion the “net overall cost” didn’t make clear that future payments had been shrunk to today’s value.
Why £35 billion is right, but misleading
The Institute for Fiscal Studies says both figures are technically correct. £35 billion is the cash that will change hands. For a deal this long, it says the Treasury figure gives a better sense of scale.
Late in the deal, one year’s payment will be over £600 million in cash but worth under £100 million in today’s money. Adding up 99 years of cash gives a number nobody will ever actually feel.
All three describe the same 99 years of payments
Both sides pick the number that suits them
The government doesn’t use discounting when it announces other long-term spending. Its £22 billion carbon capture plan over 25 years is announced as £22 billion.
So the government picks the small number when it wants a cost to look small, and its critics pick the big one when they want it to look big.
The other side
- The cash total answers a real question If you want to know how much money will leave the Treasury in total, £34.7 billion is the right answer. Calling it a lie goes too far.
- Discounting is a judgement Discounting assumes money far in the future matters less than money now. That is standard Treasury practice, but over 99 years it makes a huge difference to the total.
- It is new money Before the treaty the UK paid no rent at all. Whichever total you use, this is new spending, and nothing has been published to set against it.