Britain's higher education sector is bracing for a significant new financial burden after the government confirmed universities will be charged a flat-rate levy for every international student they recruit.
A New Charge for Global Talent
From 2028, institutions must pay £925 for each international student enrolled, a move described as a new "tax" on the sector. This charge comes atop recently tightened visa restrictions, creating a dual challenge for universities that have come to rely on income from overseas fees to subsidise other operations.
The announcement has dashed hopes within the sector for a more supportive approach under the current government. It followed an earlier decision by Education Secretary Bridget Phillipson to allow tuition fees to rise with inflation, a modest gain now effectively offset by the new levy.
Mounting Pressures on University Finances
The financial strain on universities is severe and multifaceted. Public funding has contracted, while other income streams are stretched thin. The precarious state of the sector is highlighted by its regulator, the Office for Students, which identifies 24 institutions at risk of collapse within the next 12 months.
This crisis unfolds against a complex backdrop. The expansion of higher education access, a legacy of the New Labour era, saw accepted university places surge by 68% from 336,000 in 1997 to 563,000 in 2022. While this opened doors for millions, it altered the graduate landscape. As Professor Shitij Kapur, Vice-Chancellor of King's College London, noted, a degree now acts more like a "visa" for a chance at graduate work, not a guarantee of it.
A tighter job market, coupled with rising student debt and less favourable loan terms, has contributed to a decline in the proportion of young people entering university since it peaked at the 50% target in 2017.
An Irreplaceable Asset Under Threat
Despite these challenges, universities remain a colossal national asset. They generate approximately £24 billion in export earnings, roughly 1% of GDP—a contribution exceeding that of aircraft manufacturing and legal services combined.
Ministers have prioritised skills policy and promised reforms for school leavers and adult learners, which many agree are overdue. However, critics argue the government lacks a coherent overall strategy for higher education. A recent white paper suggested closer collaboration with further education providers and reforms to the research excellence framework, but these measures are seen as insufficient to address the systemic funding crisis.
With the spectre of further strikes, course cuts, and even institutional closures on the horizon, the sector urgently awaits a clear and sustainable policy that recognises the impossible financial situation created by successive governments. The new international student levy may be the latest measure, but it is unlikely to be the last challenge for Britain's world-class universities.
