How much is the UK paying Mauritius to take the Chagos Islands and Diego Garcia off its hands?

How is paying 75 per cent of every Mauritians' annual income rational, moral or ethical?

From here:

Fact check: Government calculations set out three cost estimates for Chagos deal

Note, there is no formulaic stipulation by the UN on the amount to be paid, r the method by which an amount should be calculated – all the below is the machinations of British Treasury ‘wonks’ and British actuaries.

I previously worked out a ‘present value’ of £100 million a year for 99 years, discounted back at 5 per cent to be, as near as dammit, 2 billion pounds using the formula:

The ‘wonks’ could not be satisfied with such a simplistic method and so muddied the waters – breaking the settlement into 3 components. Let’s take a look.

One:

The UK has agreed to a £165 million annual payment to Mauritius for the first three years of the treaty.

From the fourth year, the UK will pay £120 million annually. This will be a fixed amount until the 14th year, when the payment becomes linked to the UK rate of inflation.

“With this calculation, the annual £120 million payment – which is linked to inflation from the 14th year – increases to around £800 million a year in the last few years of the deal. But £800 million 95 years from now will not be worth the same as £800 million today.

As shown in the FOI release, the £120 million annual payment drops to the equivalent of £89.2 million in today’s money by the 14th year of the deal, when it starts to be linked to inflation.

There will also be a single payment of £40 million made in the second year towards a trust fund “for the benefit of Chagossians”.

From the fourth year, an annual grant of £45 million will be paid for 25 years to “support projects that promote the ongoing economic development and welfare of Mauritius and its people”. This grant will not increase in line with inflation, remaining fixed at £45 million.

“The separate £45 million-a-year grant to promote Mauritius’s development is never linked to inflation, so falls to the equivalent of £24.2 million in today’s money by year 28, after which it is no longer paid.

Here is the real ‘wonky’ part:

“The £3.4 billion estimate cited by the Government is the more complicated “net present value“, which follows the Treasury’s Green Book guidance. This method aims to show the cost in today’s value by removing the effects of inflation – similar to the £10 billion estimate – and then discounting for so-called social time preference (STP).

‘The STP rate considers two components. The first is the expected growth in consumption per person, and the second is people’s preference for value now rather than later.’

‘Applying this method to the Chagos deal reduces the £120 million annual payment to a “present value” of £68.9 million in the 10th year of the treaty, and to just £4.6 million in the 98th year.

Side note:

I would take issue with the ‘Green Book’ guidance – not least because of the reference to ‘Green’.

1. Is this how the pledge to increase defence spending to5 per cent of GDP by 2035 being costed? An accumulation to 150 billion pounds a year over the next ten years implies a present value of around 1.1 trillion pounds discounted at the 10/20-year gilt yield of approximately 5 per cent.

2. How about the promise to build 300,000 houses a year for the next 5 years at an average price of 500,000 each (including all associated infrastructure. That’s 650 billion pounds right there!

3. Then there’s the 25 billion pounds a year (at least) for ‘net zero’ BS until 2035 – ten years – another 200 billion pounds

That comes to a few trillion pounds – compared to current national debt of 3 trillion pounds – add on welfare deficits HS2, extra runways and retro-fitting the national water supply, bailing out rail companies and you are talking serious capital requirements to be plucked from the magic money tree (which has no fruit left on its branches – the impact on 30 million UK households will add thousands from consumer increases in rates, EV costs transport fares etc. This is how you mismanage and further bankrupt an economy.

All in the next ten years

Anyway, back to the Chagos ‘deal’.

‘‘The STP rate considers two components. The first is the expected growth in consumption per person, and the second is people’s preference for value now rather than later.’

‘‘Applying this method to the Chagos deal reduces the £120 million annual payment to a “present value” of £68.9 million in the 10th year of the treaty, and to just £4.6 million in the 98th year.”

Is this expected growth In Mauritian, Chagossian or British consumption? Same goes for ‘people’s preference? These are subjective – guesswork.

I suggest that reducing 120 million a year to 69 million in the tenth rather misses the point that it’s AN ANNUAL GIFT TO 1.3 million for 14 years to MAURITIANS – which will have a distinct and significant impact on Mauritians and their $12,100 average ANNUAL salary/income!

120 million a year for 14 years, then linked to Mauritian, Chagossian or UK inflation? – works out at more than $9,000 for every man, woman and child – compared to their $12,100 current annual income. Nice money if you can get it!

Why aren’t the 4,200 Chagossian people being considered FIRST, - they have been treated horribly by the Brits- rather than Mauritians? We can ignore the 2,700 American servicemen AND 300 British servicemen.

I have the utmost respect for the specialist actuaries who are supremely skilled in mathematics – what I quibble with is the assumptions they use and the ethics/morality of those assumptions. Maybe they are doing as they are told by the Treasury and morons like David Lammy.

Onwards!

PLEASE take a paid subscription or follow/recommend my site to others you think might be interested. You may also donate via Ko-fi – (any amount three dollars and above here): https://ko-fi.com/peterhalligan