Sir Keir Starmer’s Chagos surrender deal will fund tax cuts for Mauritians, it’s emerged. The Mauritian Government says it will use £500 million to pay off its national debt, allowing it to abolish income tax for 81% of Mauritians and raise minimum salaries. The Telegraph has the story.
The Mauritian Government has said it would use almost £500 million in payments under the terms of the Chagos agreement to pay off its national debt.
This will allow ministers to abolish income tax entirely for 81% of employed Mauritians, and raise minimum salaries.
Sir Keir has been criticised over the deal, which will cost the UK up to £30 billion over a 99-year period, including rent payments to use a joint US-UK military base on the Chagos Islands and creating a pot of development spending for Mauritius.
Conservative and Reform MPs have said the “surrender” of the islands, which have been owned by the UK since before Mauritius was granted independence in 1968, was unnecessary and expensive.
The terms of the deal include rent payments of £165 million a year for the next three years for the Diego Garcia military base, which has been used for bombing runs by Britain and America in the Middle East.
Mauritian leaders celebrated the deal as the “decolonisation” of the Chagos Islands, which lie at the centre of the Indian Ocean and are uninhabited except for military personnel.
Navin Ramgoolam, the Mauritian Prime Minister, has now announced that the money paid by the UK will help Mauritius cut taxes, so that 81% of people in the African island nation will not pay any income tax.
It comes despite warnings that Britons face tax hikes in Rachel Reeves’s Budget this autumn, which is now thought to contain a black hole tens of billions of pounds large.
The Mauritian reforms were announced in a budget speech by Mr Ramgoolam last Wednesday, when he said that the UK’s Chagos payments for the next three years would be used to help pay off the country’s national debt, which has reached 90% of GDP.
He said that to reach a long-term debt level of 60%, the government would adjust “both the expenditure side and the revenue side of the budget”, and raise the minimum salary before an employee pays income tax to £8,073 a year.
That increase, of 28%, will scrap income tax entirely for 44,000 people and reduce levies on all other earners.
“As a result of the measures I have introduced, 81% of employees in our country will not pay any income tax,” he said, adding that he had also decided to cut VAT on some food products.
After three years, British payments for the Chagos Islands will be used for a “future fund” to “create wealth for future generations”, Mr Ramgoolam said.
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