Maybe the levy just moves money to where it’s needed most

I’ve seen a lot written – including here on Wonkhe – on what the proposed 6 per cent levy on international students’ fees might cost universities.

Jim is an Associate Editor (SUs) at Wonkhe

I’ve seen less on the extent to which it might save universities money.

Those with long memories might recall the days when it was pretty much mandated that a specific proportion of “additional fee income” – additional, that is, to the previous fee regime – was to be spent on student financial support.

The problem with that system persists even if the blunt mandation is long gone. Those doing the heavy lifting on WP have less to spend per student that needs it than those who are rather less successful on widening access.

The other problem with the system is that since the advent of 9k fees, the system has been saying “you’ll need to pay X, some of which will subsidise someone else”. Over time we’ve increasingly privatised the contribution while expecting the “public good” of redistribution, which is usually what progressive taxation is for.

So let’s imagine for a minute that the 600 or so £million is precisely what universities last year spent on bursaries, and that once there’s a maintenance grant in place, let’s also imagine that the cost will be circa 600 or so £million.

That could relieve universities from having to stump up the bursaries from fee income. The difference is that this time, we’ll be redistributing the money around the sector, rather than around an individual institution.

Even though the institutional contribution will be based on the number of international students at their provider and the value of fees charged, it still results in quite a significant transfer – from those universities who tend to do worse on access to those who tend to do better.

There’s a tension between the targeting and flexibility that APP bursary schemes offer and the standardisation and simplicity of entitlement that having national rules around student maintenance support offers.

But when I looked earlier this year at outcomes, in the Russell Group the £ per head in cash help to students getting some was £2,362. Across Million+ providers, that figure was £726.

If, in aggregate, what the levy does is help to shift those numbers much closer together, or at least much closer to need, it’s not hard to argue that that’s a jolly good thing.

You might argue that there are fairer ways to do national redistribution. You could look at the way in which 2022 loan repayment rules relieved richer graduates from paying their graduate tax in later years while soaking lower earners for 40 rather than 30 years.

You might also argue that a levy only on international student fee income would not quite be as fair as a levy on all student fees income.

But in aggregate, as long as it doesn’t result in price hikes that depress demand, it’s not quite the cut many have made it out to be.

And from a student’s point of view, some of your fee contribution going to a needy student in a neighbouring university really isn’t that much different to some of your fee contribution going to a needy student in a neighbouring faculty.

The only real difference between the way a government redistributes a cut of fees rather than the way a university does it is that we can vote out the government at the next election.

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Jonathan Alltimes
20 days ago

The policy of the government is to meet two targets, one is to support degree subjects in which the nation needs more graduates and the other is to support students from lower income households who can not apply to study. We do not know yet if or to what extent these aims can be reconciled together at the same time in different universities in different regions and if there are competing functions. The government administration should have already sounded out the practicalities of the policy with universities. Some universities are likely win and some are likely lose income depending on… Read more »

Shuffling
18 days ago

There are four main costs to the policy. (1) A fall in the calibre of international students as those able to pay the higher fees (assuming the levy is passed on) replace those unable or unwilling to pay it. (2) Mismatch between less affluent students and STEM degrees if the subsidy influences degree choice, reducing the calibre of graduates. (3) The administrative deadweight loss of collecting and redistributing the levy. (4) Within the Universities receiving the revenue and those collecting it, subjects that are not favoured by the government and/or which do not attract international students are run down. Over… Read more »

James Seymour
14 days ago

Worth noting that the original Browne Review recommendations in 2010 had a kind of soft fee cap where any HE provider charging above £6K for UK UG fees would have a sliding scale higher proportion of that income going back into the system for student support more widely. At the time this felt like a good idea actually but the hard £9K cap came in along with the AAB-ABB student number controls. It’s also worth noting that around 10% of headline tuition fees for the majority of international entrants across the sector include commission to educational representatives and agents. So… Read more »

James Seymour
14 days ago

Worth noting that back in 2010 the Browne Review recommended that providers charging above £6K would face a marginal % of that additional fee level going into a student support and scholarships pot for the whole sector. This was seen to act as possible brake on inflated fees and to help self fund the system. What we got was the £9K fee cap and the AAB-ABB student number control. At present most University fees for international students include a 10% or more commission paid to recruitment agencies and representatives. If this policy becomes law Universities will need to model and… Read more »

Last edited 14 days ago by James Seymour
Louis
14 days ago

I don’t really understand the argument at all. There’s no way I can see that makes another big tax rise (after employer NI) on an already squeezed HE sector a good policy. Labour is trying to justify this one and the same way as the last one, which is to pair it with some welfare spending, but that’s politics and not really a principled policy analysis. The article seems to be saying that the better universities could cover the cost of the tax by just cutting their WP spend to compensate (as opposed to changing the mix of home and… Read more »