English university leaders have been warned to be “cautious” about continuing to “vehemently” oppose the international student fee levy but may still be able to lobby for adjustments after it was confirmed the charge will be structured in a way that could “hit hardest at the institutions least able to absorb the cost”.

Following Rachel Reeves’ 2025 budget, the Treasury has settled on a flat fee of £925 per student per year from 2028 onwards, with the first 220 students exempted, as opposed to the 6 per cent charge that was initially modelled.

Responding to the news, Malcolm Press, vice-chancellor of Manchester Metropolitan University and chair of Universities UK (UUK), told ����Vlog he believed the final decision was “less unfavourable”, with the new figure amounting to about 4.5 per cent of the sector’s total international revenue in 2023-24.

“I think on balance it is probably a better outcome than many people would have anticipated,” Press said.

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 suggest the policy will generate £445 million in revenue in its first year of operation, with a net loss of income of about £270 million to the sector, given some of the costs will be passed on to students.

Press warned that institutions needed to be careful when publicly objecting further to the levy, given the sensitivity of international student markets to negative rhetoric. 

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“We need to proceed very cautiously,” he said. “I think it’s incumbent upon the sector now not to…continue arguing vociferously and vehemently about this because if we do we will…cause damage to the appeal of the UK as a destination choice for international students.

“Instead of that, I think we need to continue adult, sensitive conversations with government about the potential unintended consequences of this policy and work with them so that if we do start to see unintended consequences unfolding, we can act quickly.”

Colin Bailey, president and principal of Queen Mary University of London, said his institution would adapt to what he described as a “tax” but it would impact his ability to continue providing scholarships to local students.

“I can understand the reason for the tax; what I would say is that, my goodness, it better be used carefully and appropriately,” he said. “The support that I provide locally is now going to be provided centrally from the government, and therefore I do hope that they use it appropriately to support less privileged students to get an education they deserve.”

The government has said the money will be used to fund the reintroduction of maintenance loans, among other things.

Skills minister Jacqui Smith has also repeatedly said the levy will help demonstrate the value of higher education to the general public. 

There are, however, questions about why the policy did not feature in the chancellor’s budget speech to MPs on 26 November.

Diana Beech, director of the Finsbury Institute at City St George’s, University of London, asked: “Why undermine one of the UK’s strongest export sectors without even gaining political credit for it – whether that’s by framing the levy as a tough stance on immigration or as a much-needed boost for disadvantaged students? 

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“By going about this policy in such a hush-hush way, the levy will simply tax legitimate, highly skilled migration under the radar and heap further pressure on universities already in financial distress.” 

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She added that the per-student flat fee “risks hitting those institutions least able to absorb the cost, given the lack of price elasticity outside the elite end of the sector”. 

When details of the levy were being decided, Russell Group and higher-tariff institutions were thought to have favoured a flat fee over the percentage initially suggested, as the latter would cost them more because they tend to charge higher fees. 

“Something we were quite worried about with the percentage was the potential for gaming, so a flat fee avoids that,” Hollie Chandler, director of policy at the Russell Group, told THE. She added that the mission group had asked for a “simple and transparent system”.

“Broadly, the proposal they’ve come out with today does achieve that and it is a lower hit than the 6 per cent levy…so it also serves to protect the research investment that our universities are making.”

But, she continued, “we still need to recognise that this is a financial hit on institutions at an already difficult time”.

While the flat fee may be more harmful than a percentage to institutions with “slimmer financial buffers”, Beech suggested the flat fee is “administratively simpler and politically safer” for the government. 

“It avoids the complexity of calculating variable charges across thousands of courses with different fee structures and it also appears less punitive, particularly when it comes to high-fee courses such as MBAs, which could run the risk of generating negative global headlines should a percentage tax on these courses add up to thousands of pounds extra being passed on to overseas students.”

Smaller institutions have also expressed relief that the charge won’t apply to the first 220 students at an institution. Some such as the Courtauld Institute of Art, Norwich University of the Arts, Royal Agricultural University and Bishop Grosseteste University are likely to not have to pay anything thanks to the exemption.

“This is a helpful start to introducing policies that actively sustain a diverse higher education sector,” said Brooke Storer-Church, chief executive of GuildHE. 

“The arbitrary figure of 220 international students, however, leaves too many of our specialist, innovative and world-leading institutions exposed to payments which function as taxes on their attractiveness and high-quality offers.” 

She suggested the government should instead introduce an “incremental system that will avoid crippling our smaller-scale, specialist and vocational institutions”. 

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helen.packer@timeshighereducation.com