Scrapping post-study work visas ‘cost UK £750 million’

Evidence on international students’ tax payments raises ‘serious concerns’ about rejection of post-study work visa return, says report for Hepi

March 21, 2019
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The UK government has missed out on about £750 million of tax revenue by scrapping post-study work visas for overseas students, while analysis used by the Home Office’s immigration advisers to reject the return of these visas raises “serious concerns”, according to a new report.

Analysis by London Economics for the Higher Education Policy Institute estimates that those among the 2016-17 cohort of foreign students – from the European Union and beyond – who stay long term to work after graduation will pay £3.2 billion to the Exchequer in tax and national insurance contributions over 10 years.

The study assembles evidence that, it says, proves that the Home Office’s Migration Advisory Committee was wrong to reject the idea of reintroducing post-study work visas – a decision based on the committee’s view that the earnings of some non-EU graduates were “surprisingly low” – in its key report last year on the impact of overseas students in the UK.

The London Economics report also looks at the courses taken by non-EU graduates and – based on the assumption that their employment is linked to their subject – suggests that rather than taking jobs from UK graduates, “many international students finding sustained employment in the UK are doing so in sectors that suffer from acute skills shortages”.

The report’s authors – Gavan Conlon, Maike Halterbeck and Sophie Hedges – say that, based on their analysis, they have “serious concerns about the robustness of the MAC analysis and, as a result, the conclusions and recommendations provided to the Home Office”.

“In light of the huge taxation contribution made by international students, the impact of international students on mitigating skills gaps in the UK labour market, as well as the economic damage that has occurred as a result of post-study visa restrictions, [the need for] a longer post-study work period for international students has been clearly evidenced,” they write.

The MAC’s advice rejecting the return of post-study work visas “should change accordingly”, they add.

The report, published by Hepi and Kaplan International Pathways, uses figures from the government’s Longitudinal Education Outcomes dataset – the same data used by the MAC.

In their 10-year estimate of the 2016-17 international graduate cohort’s Exchequer contribution, the London Economics authors break this down between EU-domiciled graduates (£1.18 billion) and non-EU-domiciled graduates (£1.99 billion). This equates to £108,000 contributed per EU graduate and £104,000 per non-EU graduate.

On post-study work, the report says that its analysis “estimated a £150 million per cohort negative labour market impact associated with the restriction of post-study work rights for non-EU-domiciled students announced in 2011. Given the policy has been in operation for 5 years, the total negative economic impact on HM Treasury in terms of forgone taxation receipts is in the region of £¾ billion.”

Times Higher Education has also raised questions about the MAC’s selective focus on the earnings of some non-EU master’s graduates to justify rejecting the return of post-study work visas – when at undergraduate level, non-EU graduates earn more than UK graduates.

At a briefing for journalists last year, MAC chair Alan Manning said that the “data here [are] not as good as we would like”, adding that if further evidence was produced on non-EU earnings “we would potentially reconsider [our] conclusion” on post-study work visas.

Nick Hillman, Hepi’s director, said: “The MAC’s response to this report, produced to fill in an evidence gap they have themselves identified, is…a key test of whether people should listen to their advice on international students and their working rights.”

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