Why foreign students are crucial to the UK’s economic outlook.



The recent publication of the Home Office’s own impact assessment report on the reform of the student immigration system, puts the estimated loss to the UK economy at a £2.44 billion over the next four years. The reduction in tuition fees is placed at “only” £170 million, but the remaining colossal financial impact will primarily hit the economy, minimising much needed fiscal activity in the UK.

The report also casts doubt over the headline grabbing reduction in student numbers, in fact, not only will there be a baseline steady increase in numbers but only a reduction of 230,000, an average cut of 57,500 a year, which heavily dampens the government’s rhetoric on reducing net migration into the UK to the “tens of thousands”.

It further argues that the proposals will lead to an unquanitified risk in the number of deterred ‘legitimate students’, which will inevitably lead to British universities mitigating the ‘net reduction’ in income from fees by charging home students higher tuition fees. The only offset to the £2.44 bn loss to the economy is a £1.1 bn savings, which is spun as a win, as a result of the easing of pressures dealt to public services from the immigrant population.

This is hardly news!
The All-Party Parliamentary Group on Migration meeting on the potential economic impact of reducing overseas students highlighted these same facts back in March. The APPG’s report, co-produced by MRN and reseachers from Oxford University’s COMPAS, outlined the potential impact the proposals will have on the UK’s economic activity, and argued:

International students provide income opportunities beyond tuition fees: Universities UK (2009) estimates international student expenditure in 2007 to have generated a further £3.3bn of output across the UK economy and sustained over 27,800 jobs. The direct value of international students alone to the UK economy (including fees and off-campus spend) was calculated by the British Council in 2007 to amount to nearly £8.5 billion per year.

Following on the report the Chair of the APPG, Jack Dromey MP, tabled a parliamentary question to Home Office ministers on whether there were plans to ask the Migration Advisory Committee to conduct an assessment of the potential effects on the economy. However the Immigration minister, Damian Green MP, responded on 22 March 2011:

“We have no plans to ask the Migration Advisory Committee to assess the potential effects on the economy. An impact assessment will be published in due course.”

Fast forward to 16 June, UK parliamentarians secured a Westminster Hall debate, where an acrimonious debate forced the immigration minister to admit new guidance was needed to clarify confusions over the reform.

A dizzying chain of exchanges between MPs touched on the economic impact of the new rules, legal ramifications and possible financial withdrawals, the UK’s reputation, competitiveness and attraction abroad, language colleges, and whether the government will allow further concessions to safeguard the economy.

Labour’s immigration lead, Gerry Sutcliffe MP, who made his first outing as Shadow Immigration minister at the APPG on Migration’s meeting (18th May), pressed the government on the “negative way” the changes were impacting on the “private sector and on public colleges and universities”, however, Damian Green reiterated the need to get on with the reduction of overseas students, and that universities were fully in support of the proposals from the government to drive out abuse.

It is indeed right that abuse of the system is tackled, however, with businesses calling on the government to formulate stronger policies on the ‘structural jobs deficit’ and tackling high unemployment and the huge dependence on public sector jobs, intelligent consensus is that overseas students add billions to the economy every year and create thousands of jobs, which is crucial to the private sector.

With the government’s current strict fiscal policies coupled with an uncertain economic outlook, deterring legitimate foreign students who add billions to the UK’s economy each year will not bring the financial windfall the UK desperately needs.
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