International fee levy to cost sector £100m more than forecast

England’s international student fee levy risks costing the sector £1 billion in lost income in the space of just three years, the government’s updated impact analysis has found.

A document released as part of the autumn Budget shows previous estimates that the £925 fee per international student would drain the sector of £900 million by 2030-31 were wide of the mark.

The new analysis finds that the sector would miss out on “roughly” £280 million in 2028-29, £350 million in 2029-30, and £380 million in 2030-31.

Meanwhile, the number of students expected to disappear from universities is projected to reach 11,000 by 2030-31. Revenue generated by the policy is estimated to be £400 million in 2028-29, £460 million in 2029-30 and £480 million in 2030-31. This is £60 million less than the previous estimates over the same period.

The tariff is to come into force in August 2028. Each institution will be allowed to enrol 220 students without paying the fee, but any more than that will cost them.

The government has said the funds the levy raises will support the reintroduction of maintenance grants for domestic students who “need them most”.

But Durham University vice-chancellor Karen O’Brien has previously called the measure “absolute insanity”.

It will be up to providers how they respond to the charge, in terms of whether they swallow the cost on behalf of their international cohort or pass it on to students.

According to the impact analysis, the government has “assumed that providers will pass on the cost…in higher tuition fees” – adding that “the extent to which providers are able to do so without negatively impacting on their international student numbers will vary”.

Highly ranked institutions, with the document naming the likes of Imperial College London and the University of Cambridge, will likely be able to pass on a higher proportion of these costs without experiencing a “significant negative knock-on impact” on how many students come to them from abroad.

But universities lower down the league tables are expected to face a serious downturn in numbers. The analysis sets out its estimates for the expected reduction in international student demand were tuition fees to increase just 10 per cent. Some institutions would experience a drop of 11.2 per cent in interest from candidates abroad, it predicts.

Besides the impact on individual institutions, nationwide research efforts and teaching could take a hit.

“International student income provides important investment in our world-class science and research capability,” the Department for Education publication states.

“Universities perform circa 75 per cent of all non-business research and development. While we cannot predict the complete impact of the levy on research activity across the sector and individual institutional responses will vary, a decrease in international student income is likely therefore to decrease the cross-subsidy available to research.”

The teaching of domestic students has long been “reliant on cross-subsidies” – meaning its financial health would also suffer a knock.

Hollie Chandler, the Russell Group’s director of strategic policy, reacted to the latest estimates by reiterating the need for a “rethink”, saying the levy “will reduce vital funds available for teaching and research”.

“This will seriously harm universities' role as essential partners in generating growth in every postcode and making greater devolution a success,” Chandler added.

georgia.luckhurst@timeshighereducation.com