Funding student maintenance grants via a tax on international students will trigger course closures and push institutions into deficit, Universities UK has warned.
Vivienne Stern, chief executive of the member body which represents more than 140 institutions, told The i Paper that she has spent the last 48 hours speaking to vice-chancellors who say the announcement will mean “more course closures” and “more job losses” at universities.
The sector has already faced widespread redundancies and course closures over the last year in the face of growing financial pressure.
The Government announced earlier this week that it will reintroduce means-tested maintenance grants for students from “lowest income families” who are studying “priority courses” that aim to bolster economic growth.
The policy is due to be introduced by 2029 and will be paid for by the international student levy, which is a 6 per cent tax on tuition fees paid by overseas students, proposed in the Home Office’s recent immigration White Paper.
At present, international student fees heavily subsidise the cost of educating domestic students.
Stern cited university leaders who told her that the policy will cause their deficit to “reappear” despite spending the last year taking “tough decisions” to become financially sustainable.
“A university cannot just sit in deficit. Eventually, that will produce a disaster,” she said. “They will have to reduce their costs in order to eliminate the prospect of a growing deficit.”
She cited one vice-chancellor who told her they have a “big hole” financially, which has “just got £2.5 million bigger” due to the announcement. This was a postgraduate-only institution, meaning that despite offering provision towards critical national infrastructure, none of their students would get access to the grant.
Further details on eligibility for maintenance grants are expected to be announced at the autumn Budget, but it is thought that “priority” subjects are likely to be similar to those mentioned in the lifelong learning entitlement.
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This includes STEM subjects such as computing, engineering, physics, chemistry, economics and mathematical sciences, as well as health-related courses including nursing, midwifery and health and social care. It also includes architecture, building and planning but excludes landscape gardening.
The controversial tax to pay for the grants would cost universities in England more than £600m a year, particularly hitting leading institutions such as University College London and the University of Manchester, according to research by the Higher Education Policy Institute (HEPI).
The sector is already facing an existential financial threat, with modelling by the higher education regulator, the Office for Students (OfS), suggesting that nearly three-quarters of providers could be in deficit by 2025/26.
Stern welcomed the reintroduction of maintenance grants for students “struggling to make ends meet”, but added that the sector has “beef” with the Government for asking universities to pay for them.
She told The i Paper that it was “frustrating” that Education Secretary Bridget Phillipson recognised the financial pressure on universities and then “without mentioning it, basically handed us a great big tax”.
“The university system is under enormous financial pressure, and what has been announced at the Labour Party conference is to do a good thing – introduce grants – but ask universities to pay for it by taking £600 million out of a system that is already, in a very large number of cases, in deficit,” she said.
“What the Government has done is introduce a tax which will make that problem worse and not better. It’s a mistake. We support the policy, but not the way that they intend to fund it.”
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Stern said that if the international students levy was introduced overnight, “we’d have an absolute disaster on our hands” because universities need time to adjust to what she believes will be a loss of income.
She said: “I’ve spent the last 48 hours talking to university leaders about what this means for them. It’s going to mean more course closures. It’s going to mean more job losses. It’s going to be in universities who had put a lot of money themselves into supporting student hardship, pulling back on that because they won’t be able to afford to do it.”
Stern added that major universities such as University College London and the London School of Economics and Political Science might have to “pull back on” big research projects, while other university leaders would have to think about “what they stop doing in order to absorb that cost”.
The other option is increasing international student fees by up to 6 per cent, which she said was “neither possible nor desirable from the point of view of universities who are trying to compete with other great university systems around the world”.
The Department for Education (DfE) has been contacted for comment.
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