The government will charge universities £925 per international student for each year of study from August 2028, in a blow to cash-strapped higher education institutions.

The Treasury announced the flat fee as part of the autumn budget published on 26 November, after previously suggesting the levy could be a percentage charge.  

Exemptions have been made for smaller providers, with no charge for the first 220 international students per year.

Additional documents released by the government show that providers will be charged for all international students registered with them, “irrespective of whether the student attends franchised or otherwise subcontracted provision”. 

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The charge will apply to all institutions registered with the Office for Students (OfS) and the regulator will be responsible for the administration of the levy. 

The Treasury said the income raised by the levy “will be fully reinvested into higher education and skills, including to fund maintenance grants for disadvantaged students studying priority courses”. 

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“We will keep the rate under review, with future decisions on deployment of the proceeds set out at the next spending review.”

Documents show the government expects the levy charge to increase with inflation. 

Speaking in London hours before the budget announcement, skills minister Jacqui Smith said the government had listened “to the case made by the sector” when designing the levy.

Going with a flat fee rather than a percentage is thought to favour elite institutions, including those in the Russell Group, who typically charge higher fees.

Previous modelling by ����Vlog found that the Russell Group would save £100 million if the government opted to charge English universities a £1,000 flat fee under the proposed international student levy, but the switch from the percentage tax initially mooted will mean other institutions would fare considerably worse.

The policy will only apply to English universities, although there are fears across the sector that the devolved governments may also adopt the levy in future. 

The government intends to reintroduce maintenance grants for domestic students, which were scrapped in 2017. These grants will initially be worth £1,000 for students whose household income is below £25,000 a year, the government has confirmed.

The Institute for Fiscal Studies has previously estimated that the new grants would reach about 10 per cent of students.

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With almost half the sector already facing financial deficits this year, universities will also be hit by wider economic policy measures announced in the budget.

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Rumoured changes to salary sacrifice pension contributions are also set to go ahead, with contributions above an annual £2,000 threshold no longer exempt from national insurance. 

This will come into force from 2029 and is set to raise almost £5 billion for the government in its first year. The cost of this is likely to be borne by employers, including higher education institutions. 

Before full details were released, the Universities and Colleges Employers Association estimated this could cost individual institutions between £1 million and £3 million a year in higher national insurance payments, and cost the overall sector more than £50 million.

Speaking in the House of Commons, Reeves said the current salary sacrifice system was “not sustainable”.

The government will also freeze the repayment and interest rate threshold for student loan repayments for those on Plan 2 for three years starting from 2027-28.

According to the Office for Budget Responsibility, this will increase cash receipts by £400 million per year in the medium term as a higher portion of income becomes subject to repayment.

Reeves also announced that seven mayors will be given £13 billion to invest locally, including in skills. Policy analysts have previously suggested such funds could provide opportunities for local universities.

The chancellor also announced further measures related to skills, including funding to make apprenticeship training for under 25s free for small and medium businesses.

Alex Sobel, Labour MP for Leeds Central and Headingley, said he was “disappointed” the government was moving ahead with the levy.

“In constituencies like mine, universities are major economic drivers, supporting jobs, skills and world-leading research, and this tax risks undermining that foundation at the worst possible time.”

University and College Union (UCU) general secretary Jo Grady said the levy will do “more harm than good”.

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“Labour is echoing Reform by scapegoating migrants instead of addressing the real, deep-rooted challenges facing higher education.”

helen.packer@timeshighereducation.com