Britain's higher education sector is bracing for a significant financial blow after the government confirmed a new flat-rate tax on international student recruitment. From 2028, universities will be required to pay a levy of £925 for every international student they enrol, a move that has sparked warnings of institutional collapse and deeper sector-wide turmoil.
A Sector Under Immense Financial Strain
The announcement of the new charge comes at a time of unprecedented pressure for UK universities. Public funding has contracted sharply, while other income streams have been stretched thin. The precarious state of university finances is starkly illustrated by the regulator, the Office for Students, which has identified 24 institutions at risk of failure within the next 12 months. Many more are expected to face severe difficulties in the coming years.
This new levy compounds existing challenges, including tighter visa restrictions that have already made recruiting overseas students more difficult. For many universities, particularly those with weaker financial positions, the additional cost could be the final straw that tips them into insolvency.
The Evolving Value of a University Degree
The financial woes of universities exist alongside a shifting landscape for graduates themselves. The massive expansion of higher education that began under New Labour—seeing accepted places surge from 336,000 in 1997 to 563,000 in 2022—has changed the fundamental promise of a degree.
As Professor Shitij Kapur, Vice-Chancellor of King's College London, recently noted, a degree no longer guarantees a graduate job. He likened it to a "visa" offering a chance, not a certainty. This tougher job market, combined with rising student debt and less favourable loan terms, has contributed to a decline in university participation rates since they peaked at the 50% target in 2017.
A Lack of Coherent Strategy
While the Labour government promised a "change of approach," sector leaders argue that recent decisions reveal a lack of a coherent, long-term strategy for higher education. The modest benefit of allowing tuition fees to rise with inflation was immediately offset by the new international student levy.
Ministers have suggested universities should collaborate more with further education providers and have proposed reforms to the research excellence framework. However, these piecemeal measures fail to address the systemic funding crisis or outline a clear vision for the future of UK universities.
This is a critical oversight, given the sector's immense value. UK universities are a major national asset, generating approximately £24 billion in export earnings—about 1% of GDP. This contribution surpasses that of aircraft manufacturing and legal services combined.
The government's focus on skills policy and reform for school leavers is welcome, but it cannot succeed if the university system that supports it is allowed to falter. As students and academics return to campuses, the need for a sustainable and strategic funding plan has never been more urgent.
