Departments Split On Size Of International Student Levy
4 min read
Exclusive: There is disagreement within the government over how big the new levy on international students should be.
The proposed levy on international student income, announced as part of the government’s Immigration White Paper in May, would see universities taxed for each overseas student they enrol.
Ministers are expected to use the new levy to fund the reintroduction of selective maintenance grants, announced by Education Secretary Bridget Phillipson at Labour Party conference in September, as well as the government's skills agenda.
The Labour government also wants to reduce net migration after high levels of legal immigration following the coronavirus pandemic.
When the policy was first announced, Labour MPs with universities in their constituencies expressed concern that it could exacerbate funding pressures facing higher education.
While the levy was later all but confirmed as part of the Post-16 White Paper, the exact details of what form it will take are still being worked out, with more detail expected in the Autumn Budget later this month.
When first proposed, it was understood that the government was looking at a 6 per cent levy, but PoliticsHome understands that another option now under consideration is a tax of £1,000.
The percentage-based model is favoured by the Department for Education, as well as smaller universities, and it would be expected to raise more than the flat fee.
However, PoliticsHome understands that other departments, including the Treasury, would favour the £1,000 flat fee.
It is expected that a 6 per cent rate would hit research universities, considered a particularly important element of higher education, harder than smaller institutions.
Some in the higher education sector also believe that a flat fee would remove the ability for institutions to "game" the system by reducing fees, but make up the balance by introducing ‘service charges’, which would be out of scope of the levy.
Advocates of a £1,000 fee also argue that it would be simpler to implement, as well as easier to communicate to the public.
Speaking on a recent episode of PoliticsHome podcast, The Rundown, former universities minister Lord Jo Johnson said international student policy is "subject to a tug of war between different government departments".
PoliticsHome revealed earlier this year that the government was considering imposing further restrictions on international students bringing family members to the UK, closing a loophole allowing overseas students doing research Master's degrees to bring relatives with them.
International students, who pay more to study in the UK than their domestic counterparts, have become a key source of income for universities in recent years.
The head of the Russell Group, Dr Tim Bradshaw, told PoliticsHome earlier this year that the new proposed levy could cost English universities around £370m a year, while vice chancellors have warned of course and staff cuts.
If a levy is implemented, then universities would face having to decide whether to absorb the costs or charge international students a higher rate to offset the impact.
Sarah Stevens, director of policy at Russell Group, told The Rundown podcast last week that introducing the additional costs to the sector, like the proposed international levy, will "force institutions into making even further cuts, which will damage what the government's trying to achieve in terms of its economic mission and spreading opportunity".
There are also debates over what impact such a move would have on the ability to attract international students to the country.
While the government has predicted a small impact on international student numbers if the levy is introduced, think tank Public First has predicted that the government is "drastically underestimating the impact of price increases on demand".
Public First modelling predicts almost three times as many non-EU students would be put off by the rise than currently anticipated by the government.
A spokesperson for Universities UK said that international student fees cross-subsidise university teaching and research, and "the evidence suggests that the proposed levy could reduce this income significantly, cancelling out the impact of the recent fee uplift and limiting universities’ ability to support growth-driving research, teach students in subjects vital to the future economy and widen participation".
"We are asking the government to work with us to consider other ways to fund maintenance grants that protect rather than hinder the long-term sustainability of universities and the benefits they deliver.”
A Department for Education spokesperson told PoliticsHome: “The international student levy will fund the reintroduction of targeted maintenance grants to break down the barriers to opportunity for disadvantaged students.
“These form part of our plans to open up access to universities, restoring them as engines of aspiration, opportunity and growth. We will set out further details in the Autumn Budget."
