Following today’s Budget the Department for Education has published a revised impact analysis on the International Student Levy (ISL)
As a reminder, the ISL is a £925 fee per international student levied on providers. This will increase in line with inflation each year. The first 220 students will be exempt from the levy to a cumulative value of about £30m to the sector.
There have been three significant updates to the impact assessment. The first is an update to the data sources. The impact analysis now includes the latest HESA student and finance data, and the latest Home Office data on sponsored student visas and Confirmation of Acceptance of Studies (CAS). The analysis also includes “new evidence on the price elasticity of international student demand” which “replaces the Public First analysis used in the previous assessment.” In addition there has been “enhancements to the treatment of provider behavioural responses, accounting for student allowances that exempt providers from the levy for an initial number of students, and academic year to financial year conversions, alongside refinements to the sequencing of key modelling assumptions.”
The new estimate includes a key assumption that international student numbers, across all levels of study, will fall by one per cent between 2024–25 and 2025–26, and then fall in line with CAS issuances from 2025–26 to 2026–27. In the initial impact assessment international student numbers would fall by 3.5 per cent between 2024–25 and 2025–26.
The net financial impact of the levy is worse than the initial estimates. As the assessment sets out “The student allowance protects approximately £30m of provider revenue across the sector. Our estimates of income losses to the sector have increased from £900m over three years to £1bn over the same period, predominantly reflecting data updates and improvements to the modelling approach.”
In short, a levy that the sector warned would be harmful is in fact £100m more harmful over the next three years than it had initially been warned. As the number of students who would have turned up but now will not reach 11,500 by 2033–34 this measure will have a long-run financial impact on the sector.
Disappointingly for Andy Burnham and his innovation nation, which he has made so much of, and his Chancellor has just backed, a result of this levy is that “a decrease in international student income is likely therefore to decrease the cross-subsidy available to research.”
It is almost like government policy is made in silos.