Starmer accused of defence spend ‘cover up’ in row over how £9bn Chagos deal is funded

The PM said the uplift would boost ‘our capability on defence and security in Europe’, but stopped short of ruling out using defence cash to fund Chagos deal. Sir Keir Starmer has been accused of a “cover up” over his increase in defence spending after he refused to say whether it includes funding the cost of handing over the Chagos Islands to Mauritius.

The prime minister told MPs on Wednesday that the uplift is aimed at boosting “our capability on defence and security in Europe”, but stopped short of ruling out using the cash to lease back the joint UK-US Diego Garcia airbase located on Chagos. The UK is in talks to hand control of the archipelago back to Mauritius as part of a deal rumoured to be worth £9 billion.

The government has refused to set out how much a 99-year agreement to rent back the base will cost, promising to set out the costs before parliament when the deal is signed. But the PM faced intense pressure at PMQs to say whether any of the additional £6 billion in annual defence spending announced on Tuesday will be used to fund the Chagos deal.

It came after defence secretary John Healey also refused to say whether payments to Mauritius would be included in the increased defence budget. Ms Badenoch asked Sir Keir at Prime Minister’s Questions: “This morning the defence secretary could not say if the Chagos deal would come out of the defence budget. Can he confirm to the House that none of the defence uplift includes payments for his Chagos deal?".

The PM hit back, telling MPs: “The additional spend I announced yesterday is for our capability on defence and security in Europe, as I made absolutely clear yesterday. The Chagos deal is extremely important for our security, for US security. The US are rightly looking at it. When it's finalised I'll put it before the House with the costings.

"The figures being bandied around are absolutely wide of the mark, the deal is well over a century but the funding I announced yesterday is for our capability to put ourselves in a position to rise to a generational challenge, that is what that money is all about and I thought she supported it.".

It came after Sir Keir outlined plans to hike defence spending from 2.3 to 2.5 per cent of GDP by 2027, at an annual cost of £6 billion, funded by slashing the UK’s foreign aid budget. The PM was earlier reprimanded by top economists and accused of fiddling the figures for the misleading claim the boost was worth £13.4 billion, based on the unlikely assumption defence spending was set for a real terms fall if not for the uplift.

Ms Badenoch sought to take advantage of the confusion, adding: “I think this all points to what amounts to really a cover-up of where this money for the Chagos surrender is coming from. “It is incumbent on the Government as soon as possible to come and explain where the money is coming from, and if it is coming from the defence budget it makes all of the announcements over the last 24 hours seem (to be) ringing increasingly hollow.”.

Currently, the UK-US airbase is on British sovereign territory so there is no need to pay for a lease. However, if the UK hands the islands back, the government will have to pay for a 99 year lease of the site. The rumoured payments for the base would amount to £90 million each year - between one and two per cent of the £6 billion defence spending uplift.

Shadow defence minister Mark Francois asked how Labour MPs would feel realising the party had cut overseas aid to give billions of pounds to Mauritius “all to rent back a base we already own”. “It’s madness,” he added. The row came after a Tory source told The Independent that the £6 billion extra for the Ministry of Defence taken from the aid budget would in fact be spent on leasing back the Diego Garcia base.

“Basically there will be no new money. All Labour are doing is transferring the money needed to pay for the Chagos deal with the MoD who will now have to pay for it. This is smoke and mirrors,” the source claimed. A government source hit back, adding that there were “orders of magnitude” between the annual uplift in defence spending and any future payments to Mauritius for the Chagos deal. “It’s nonsense,” the source added.