The government was due to announce plans to make it harder for overseas students to come and study at UK universities, with the aim of cutting the level of legal immigration. For months now, the government’s widely trailed plan to scrap the international graduate visa – which allows students to study at UK universities and then stay for at least two years after their course – has been the source of rumbling division within the Conservative party and unease from universities and business. Sunak is under intense pressure from the right of his party to scrap the system to get net migration figures down, but many cabinet ministers are worried about the consequences. It’s been widely reported that Sunak will back down.
Why UK universities need international students
Because whatever the detail of any watered-down plan , the debate has highlighted the crisis afflicting the sector – and its reliance on overseas students to make ends meet. Despite the myth that international students “take” places from domestic students, says Rachel Cunliffe in The New Statesman, the reality is that universities accept large numbers of foreign applicants and use the higher international fees to subsidise places for domestic students, whose fees are capped at the 2018 level of £9,250. Overseas students typically pay two or three times more than that, and up to £38,000. That’s cash that universities desperately need – fees from non-EU students rose from 5% of universities’ total income in 2000 to 20% last year.
Rise of international students in UK universities
Boosting numbers of foreign students was the intended goal of specific government policy. Under the UK’s International Education Strategy, launched in March 2019, the government sought to boost education exports to £35bn per year and set a target of 600,000 international students studying in the UK by 2030. To attract students, they were allowed to bring dependents to work in the UK for at least two years after completing their studies. Since then, the lure has proved strong. Indeed, the strategy “worked only too well”, says Jeremy Warner in The Telegraph – 114,000 graduate visas were issued last year, plus a further 30,000 visas for their dependents. The number of overseas students already exceeds the 600,000 target, six years early.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Are some international students exploiting the system?
That’s the view of many on the Tory right. In a recent report for the Centre for Policy Studies, ex-ministers Robert Jenrick and Neil O’Brien dismissed the economic and fiscal benefits of the scheme and called for its wholesale abolition. And there can be no doubt, says Warner, that some people are indeed using the graduate route “as a backdoor way into the UK jobs market and eventual residency”. However, earlier this month the Migration Advisory Committee, the UK government’s independent adviser, concluded a 14-week investigation, commissioned by Cleverly, into the graduate visa scheme. It found there was no evidence of widespread abuse and it should remain in place as vital to universities’ finances. It also found that graduate visa holders swiftly found similar jobs to those of British graduates, with similar earnings.
Toughened UK government rules to cut immigration
In January, new rules were introduced banning international students from bringing family members into the country, and raising salary thresholds needed to remain here post-study – a move that is proving more effective than expected in rapidly slowing demand. The MAC report found that the number of international students paying a deposit to study in the UK this autumn had fallen 63% (as of this month) compared with a year earlier. Further measures under consideration include a clampdown on recruitment agents that market British degree courses overseas, with penalties for those who fail to supply the type of students they promise; mandatory English tests for those students who remain in the UK; and restricting the visa route to the 24 research-intensive Russell Group universities. There are also plans to prevent institutions with high dropout rates from recruiting overseas students. However, many universities have become dependent on the recent influx of overseas students to stay afloat, and are already desperately worried about the falloff in numbers.
How bad is the UK university crisis?
Multiple institutions are on the brink of financial distress, with potentially devastating consequences for current students and staff – and, indeed, the taxpayer, who could soon be on the hook for rescue packages and bailouts. Earlier this month a report by the Office for Students forecast that 40% of England’s universities would end this year in the red. The MAC report warns that cutting overseas student numbers would cause universities “substantial financial difficulty” and could lead some to “fail”.
Why is the education sector in trouble?
The root causes of the crisis are well known: rapid expansion of higher education since the 1990s, without a concomitant increase in funding, and a real-term fall – for political reasons – in the fee levels paid by UK students. Compared with other rich OECD countries, the UK spends relatively little on higher education. On average, those countries spent $11,700 (2019 figures, adjusted for purchasing power parity), but the UK spent just $7,000. Germany ($15,900) and France ($13,900) were much higher. Given the political toxicity of raising tuition fees, the funding dilemma probably boils down to either lowering the point at which graduates start repaying loans, or increasing subsidies from taxation. Either way, it’s clear that the UK’s funding model is broken, says the Financial Times. And with the imminent general election, Labour may shortly inherit the problem – it’s high time it set out a credible vision of its own.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
