Based on the latest HEPI data, the Institute estimates the levy could “hamper universities’ ability to compete with institutions in other countries,” said independent researcher Mark Fothergill, who compiled the data.
The proposed 6% levy on international students’ tuition fees was first introduced in the government’s highly anticipated immigration white paper, coming as a surprise to many in the sector.
HEPI has warned that the policy will hit both large internationally engaged universities and smaller specialist institutions. According to the analysis, the largest financial losses are expected to hit big metropolitan universities with high proportions of international students.
Namely, University College London (UCL), which derives 79% of its fee income from non-UK students, could be faced with financial losses of £42m.
Meanwhile, Manchester University and King’s College London (KCL) could also be hit with heavy losses of £27m and £22m respectively, with 19 institutions paying at least £10m.
Stakeholders have pointed out that while the levy is intended to raise money for the “higher education and skills system”, it is unclear if all the money will come back out of the treasury, and how it will be spent if it does.
“International students are the backbone of our higher education system, contributing over £10 billion in fees to English universities – around £4.50 of every £10 of fee income,” Fothergill said.
“No wonder the 6% levy is seen as a tax on one of the country’s best-performing sectors,” he added.
With more details expected in the autumn budget, universities are left with two options: pass the cost onto students and become less competitive or absorb the costs and leave less funding for teaching and research, HEPI suggested.
While universities haven’t announced to what extent they would try to absorb the extra costs, a reduction in international student numbers – whose fees subsidise university research – would also hamper sector finances.
Speaking at a conference last month, the UK skills minister Jacqui Smith maintained the government was “not levying international students directly”, suggesting it would help show students’ economic contribution to local communities.
The levy is a shadow looming large over universities as they prepare for the next academic year
Nick Hillman, HEPI
“Threatening an expensive new tax on one of the country’s most successful sectors with only a rough idea of how the money will be used seems far from ideal,” said HEPI director Nick Hillman.
“Currently, the levy is a shadow looming large over universities as they prepare for the next academic year,” he added.
Amid policy volatility in other markets, the UK has increasingly been cited by students as the most stable of the ‘big four’ study destinations, with stakeholders keen to preserve this reputation.
“There are good reasons why Australia opted not to implement a levy when it was proposed there a couple of years ago,” warned Fothergil.
With the UK higher education sector already facing severe financial headwinds, Hillman said university leaders were worried the levy will be “yet another weight dragging them down in the struggle to remain globally competitive”.
According to OfS data, 72% of providers could be in deficit by 2025/26, with a sector-wide deficit totalling £1.6bn.
Alongside the levy, the government’s white paper proposed shortening the graduate route visa from two years to 18 months, and tougher Basic Compliance Assessments (BCA), with the latter set to be introduced in September.
