Increasing costs for international students won't help cash-strapped university towns

A chancellor with an overriding commitment to growth would not slap an arbitrary tax on one of the country’s most successful export sectors.

- Richard Lambert

By contrast, one with different ambitions might impose such a tax and use the proceeds to prop up politically important spending programmes elsewhere. That's the choice Rachel Reeves will be making in her budget speech later this month, when she announces her decision about the proposed levy on fees paid by international students for studying in English universities.

It’s going to be a clear test of where the government’s economic priorities lie.

The idea first came up last May in the government’s white paper aimed at curbing immigration. Among other things, this listed various abuses in the student visa system and suggested broadly sensible ways of dealing with them. Then it suddenly changed gear. International students, it said, had generated an estimated £20.7bn in exports through living expenditure and tuition fees back in 2021. “But it is right that these benefits are shared.”

This was a strange assertion, given the fact that these fees are already being used to subsidise the heavy losses that universities make both on teaching domestic students and on research. Funding per head for UK students has fallen by more than a quarter in real terms over the last 10 years and the financial gap has been plugged by a sharp increase in the number of foreign students paying higher fees. These now account for roughly a quarter of universities’ overall income, up from a negligible amount 30 years ago.