Labour’s EU reset has a university problem

Labour’s plan for a reset of EU relations has hit a snag.

The problem has nothing to do with fisheries, trade, or defence and everything to do with university fees. So why does Labour refuse to touch higher education funding? And is this a moment of danger or opportunity for the sector?

As Keir Starmer tries to build himself a legacy, the EU reset is one of the few chances for growth Labour has left. Rachel Reeves has previously declared the biggest prize for growth is clearly with the EU – and Brussels wants a deal too.

But the sticking point remains a “youth experience” scheme that would allow young people to work and study in the UK for a limited time. Brussels wants the scheme to be uncapped and for EU students to pay UK home fees, while Britain insists on a 50,000-person limit and refuses to budge on fee-paying status.

Maybe it’ll go away?

Labour’s unwillingness to wade into any tuition fee debate has two roots – concerns over immigration optics stemming from preferential treatment towards the EU, and – more to the point – the risk that any adjustment to international fees, even if limited to EU students, could push universities into serious financial trouble.

With universities heavily reliant on international fees to cross-subsidise almost everything else they do, the sector can’t afford another blow. And it would be the Labour government carrying the weight of responsibility for any university that collapsed because of a choice to remove a major funding source, all while watching a sector already facing deficits, closures, and redundancies.

All of which means that any fight over a youth experience scheme to get the EU deal over the line really needs to be a fight about university funding. Since Labour has staked trade, energy, and security on closer ties with the bloc, ignoring the problem simply won’t do. Yet ignore is exactly what Starmer seems intent on doing, pushing back any negotiations on fees to a later date – perhaps in the hope the EU might forget.

Labour is also wrong to think its only options are equally bad ones. The choice looks like either financially crippling a major sector or abandoning progress on an overhaul of UK-EU relations. What nobody is talking about is the prospect of a funding settlement that would allow the sector to absorb changes to EU fees.

Pounce while you can

Brussels has started to doubt whether Britain can, in the face of Labour’s troubles, hold a steady enough line to commit to any deal. But the very instability that worries EU officials is also the opening for government and the sector to act.

An imploding government and a looming leadership contest mean the political ground is suddenly there for someone to move on a funding settlement, and the appetite for movement sits right at the top of Labour’s runners and riders.

Reeves and Starmer have already shown strong interest in placing the EU deal high on the legislative agenda, as evidenced in the King’s Speech. Wes Streeting has gone further still, openly expressing an ambition for the UK to eventually rejoin the EU, and even Andy Burnham has, despite currently remaining cautious, previously voiced a desire for closer ties.

A leadership hopeful who grasps that the crux of the deal runs through university funding could break this deadlock – and in doing so signal a serious willingness to accept the required trade-offs for political change more broadly.

Quick fix or full rebuild?

Working with the higher education sector on a funding settlement for EU students under a new mobility scheme could take several forms. In its most basic version, it might look like Labour promising to compensate universities for any lost fee revenue. The bill would be sizeable but containable.

With only 63,600 EU students in the UK in 2024/25, restoring their home fee status would cost universities just the gap between international fees – likely £16,000–£18,000 by my estimation – and the £9,535 home cap. That adds up roughly to £500 million per cohort, which is the same sum the government found in 2025 to back underrepresented entrepreneurs.

The figure is also static and ignores the dynamic effect of drawing in more EU students, whose addition would offset part of the cost – making the investment more plausible still when set against the likelihood of positive net returns from growth brought about by an EU deal.

Government and the sector could also be more ambitious. Instead of patching over the question of EU fees, Labour could use this moment to rethink what a more durable funding model across all of English higher education might look like.

Universities only lean on international fees so heavily because the existing model has been underfunded for years, and fixing that root problem would not only enable government to secure an early win in its broader EU goals – it could put the English higher education sector on a firmer long-term footing.

A government serious about a reset therefore has every reason to look at a wider settlement, rather than just the EU slice of it. Suggesting what that full restructuring might look like is another matter for the sector as a whole to figure out, but if this opportunity goes missed, the EU deal will be permanently blocked and HE funding will find itself in an ever-deeper rut.

Worse still, if the sector does not speak out, the government may resort to cutting fees with no compensation. The stakes are high and no outcome is certain. The only thing we can know for sure is that if Labour wants the deal done, it should look to university funding – and if it wants a deal done this summer, it had better start looking now.