Labour MPs Warn New Restrictions On International Students Could Compound The University Funding Crisis

Backbenchers have raised concerns over the impact of immigration reforms on university finances (Alamy)

On Monday, the Home Office announced that it would look at imposing a levy on international student income and tighten visa rules as part of the government's wider bid to reduce net migration.

Rachael Maskell, whose York constituency is a major student hub, told PoliticsHome that the move is "misjudged and seeks populism over pragmatism".

Maskell and other Labour MPs have expressed concern about how it will impact a higher education sector that already faces severe financial pressures, as well as how it could affect the growth agenda.

Vivienne Stern, chief executive officer of Universities UK, urged the government to "think carefully about the impact that a levy on international student fees will have on universities and the attractiveness of the UK as a study destination".

International students have become a key source of funding for universities in recent years, with the money raised being used to help institutions cover the cost of domestic students.

Tuition fees for domestic students had been frozen since 2017 until Education Secretary Bridget Philipson lifted them last month in line with inflation.

Restrictions on overseas students brought in by the previous Conservative government led by Rishi Sunak have resulted in many universities reporting a drop in applications from abroad.

In January, PoliticsHome revealed that some universities had seen income from overseas students drop by as much as £10m year-on-year as a result of a fall in applicants.

Education Committee chair Helen Hayes told PoliticsHome earlier this year that the financial crisis facing universities nationwide has reached a "crunch point".

The Immigration White Paper, published on Monday by the Labour government, sets out further plans to reduce net migration. 

Under reforms revealed yesterday, the government will reduce the time that graduates can remain in the UK after completing their studies before landing a skilled job from two years to 18 months.

The government is also exploring a new levy on overseas students, adding that it would reinvest money raised "into the higher education and skills system".

In an analysis published alongside the white paper, the government said the six per cent levy under consideration could lead to the number of international students applying for visas falling by 7,000 a year.

Speaking to the BBC on Monday, education minister Baroness Smith said that the proposals put forward in the white paper will mean fewer overseas students coming to the UK.

She also warned: "The financial sustainability of our universities cannot depend on more and more international students coming into the country", later adding "we cannot depend for the future of our universities on that".

The changes have triggered worry among MPs with large universities in their constituencies, however, not just for the future of the institutions themselves, but for the investment and employment they bring to the local economy.

"I am very concerned that this policy will undermine the Chancellor's ambition for the growth agenda," said Maskell, MP for York Central. 

"It is misjudged and seeks populism over pragmatism. I am especially concerned about the impact on my constituency in York."

Maskell told PoliticsHome that universities may be forced to put fees up further to counter the impact of these policies.

"If students are paying higher costs, we must remember that these students have other choices. They could go to Europe, Canada, or America, and global industries will follow."

A recent report by Public First revealed that the gross export value of higher education from international students is £20.1bn a year.

The introduction of a levy on university income from international student fees has also raised concern across the sector. 

While any investment into the sector would be welcome, there are concerns that the money may not be spent effectively, and there are questions over where exactly the money raised from the levy will be invested.

PoliticsHome understands that there are ongoing discussions in government about where the money raised from the levy will be invested.

Nick Hillman, director of the think tank Higher Education Policy Institute, said he was concerned that some of the money raised "will be siphoned off by the Treasury – just as has happened with the apprenticeship levy".

“The idea of a levy on international students will be deeply controversial, just as it has been in Australia, where a debate has been raging on this idea for months. A levy will be seen by many as a tax on a very successful UK export sector."

Clive Lewis, the Labour MP for Norwich South, warned that the levy "may end up being spent on, in vague terms, skills".

While Lewis acknowledged the importance of skills, he added, "it shouldn’t be zero sum game and a trade-off between skills and university teaching". 

Lewis also warned that the attractiveness of the UK to international students could be negatively impacted by the restrictions set out by the Home Office on Monday.

"You cannot help but think that the rhetoric around immigration and asylum, the race riots, Brexit, you're going to have a further chilling effect on those coming here."

Lewis said that curbing the flow of international students without replacing that income with another funding system will put "many universities in a more precarious position".

Chi Onwurah, the Labour MP for Newcastle Centre and West, which also has a significant student population, warned that restrictions brought in by the previous Tory government had already caused "significant disruption".

"The international student fees have long been a golden goose for universities, particularly for cross-subsidising scientific research," she told PoliticsHome.

"The changes that we have seen in the last few years, with the government changing its mind about whether it wants to attract international students, have caused considerable disruption."

Onwurah said these new measures risked "increasing uncertainty", adding it was "hard to see how a levy on [overseas students] will improve university financial sustainability".

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