Universities face foreign student tax as Starmer cracks down on migration

Telegraph

12-05-2025

Universities face a new tax on foreign students as part of Sir Keir Starmer's efforts to reduce net migration.
In its long-awaited white paper, the Government announced it was considering a 6 per cent 'levy' on the £12 billion-a-year fee income that universities generate from overseas students.
It said the money would be reinvested in the 'higher education and skills system' as part of the white paper's proposals to boost training of domestic workers to reduce UK industry's reliance on foreign staff.
The white paper also cut the time that foreign graduates can remain in the UK after finishing their studies from two years to 18 months. They do not have to work during that period, but will only be allowed to stay on afterwards if they are in graduate-level work.
University rules on recruiting foreign students are to be tightened, requiring fewer drop-outs and no-shows. Universities that fail to meet these tougher targets will face restrictions on the numbers they can recruit and could be barred from sponsoring foreign students.
The moves sparked a backlash from universities, which have already had a 16 per cent drop in applications from overseas after a crackdown by the Tories on students bringing dependents with them. One union leader warned it could push universities into bankruptcy.
Vivienne Stern, chief executive of Universities UK, said: 'Following years of frozen fees, inadequate research funding and a rapid downturn in international students, the current operating environment is very challenging.
'We would urge the Government to think carefully about the impact that a levy on international student fees will have on universities and the attractiveness of the UK as a study destination.'
Jo Grady, general secretary of the University and College Union, said: 'This anti-growth white paper is straight out of the Reform playbook. With higher education already under severe financial pressure, any further restrictions which deter international students from coming to the UK could lead to universities going under.'
She added: 'The Home Office needs to stop imposing arbitrary restrictions that prevent international students and staff from coming to the UK, driving economic growth and enriching local communities. Its failure to do so will harm universities, the country and our global standing.'
Nick Hillman, director of the Higher Education Policy Institute, said the 'deeply controversial' levy was 'a tax on a very successful UK export sector'.
'There will also be concerns that some of the money raised will be siphoned off by the Treasury – just as has happened with the apprenticeship levy,' he added.
The number of foreign students – who pay full fees of as much as £60,000 a year and effectively cross-subsidise universities losses on UK students – have more than doubled in the past five years.
More than half moved on to another visa after completing their studies in the past three years, up from 20 per cent in 2020, meaning they have had a bigger impact on net migration.
The white paper said there was, however, evidence that the system was being abused with 16,000 making asylum claims, accounting for about half of all such applications from people who had arrived in the UK on a visa.
'The evidence suggests that at present, in some cases, the integrity of the UK's student visa system is being undermined, both by individuals from overseas seeking to exploit it and by education providers in this country failing to protect it,' said the white paper.
It raised particular concerns over the numbers of foreign students coming to the UK for masters' courses, which increased by 150 per cent to 315,000 between 2020 and 2022, and over the types of institutions with the biggest rises.
Visas for universities in the bottom-ranked 500 universities rose by 49 per cent in the two years to 2023, compared with a fall of 7 per cent in the top 100.
To prevent the misuse of student visas, universities will now be required to ensure at least 90 per cent of foreign students complete their courses and at least 95 per cent turn up for them. A new red-amber-green warning system will tell the public how universities are performing in achieving compliance.
Universities 'close to failing on their metrics' will have to draw up an action plan and face limits on the number of new foreign students they can recruit.