£85m blow to Scottish universities as Keir Starmer unveils international student levy

Scottish universities could be left facing an £85 million annual bill under a proposed UK Government levy on international students.

The charge, unveiled by Prime Minister Sir Keir Starmer as part of a broader immigration crackdown, would impose a six per cent tax on universities’ income from overseas student tuition fees. It is the first levy of its kind and is set out in a Home Office white paper released earlier this month.

Calculations by university sector sources based on 2023/24 enrolment figures suggest that, if extended to Scotland, the tax would cost the country’s 19 higher education institutions around £85 million each year.

The announcement comes as Scottish universities face mounting financial strain. The University of Edinburgh recently revealed it had accepted voluntary severance from around 350 staff amid efforts to plug a £140 million deficit—around 10 per cent of its annual turnover.

The University of Dundee has also announced around 300 job losses following a £35 million budget gap, while up to 70 positions could be cut at the University of Aberdeen due to a £5.5 million shortfall.

Claire McPherson, Director of Universities Scotland, warned that the new tax could worsen already severe financial pressures in the sector.

“We urge the UK Government to think carefully about the impact that a levy on international student fees will have on universities and the attractiveness of the UK as a study destination,” she said.

“Universities’ financial and operating environment is already very challenging. We cannot understand the logic behind a levy that would move resource away from universities. It risks making a bad situation worse.”

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Ms. McPherson also called for the decision on whether to implement the levy in Scotland to be devolved to Holyrood.

“Within the UK, we’d hope to see the UK Government defer a decision on the applicability of any levy in Scotland to the Scottish Government, reflecting the fact that university funding is devolved,” she said.

“We’d then hope that the Scottish Government will see this as an opportunity to differentiate Scotland’s higher education sector from the rest of the UK, in terms of strengthening Scotland’s appeal when recruiting internationally.”

The Prime Minister defended the levy in a speech on Monday as part of a suite of immigration reforms aimed at reducing net migration, which reached a record 906,000 in 2023. Starmer warned that the UK was becoming an “island of strangers” and vowed to “take back control of our borders”, promising to end what he called a “squalid chapter” in British politics and the economy.

He denied accusations that his language echoed the rhetoric of controversial figures such as Enoch Powell, or that the policy shift was in response to Labour’s local election losses to Nigel Farage’s Reform UK.

The proposals have drawn criticism from political opponents and business groups, with Scotland’s First Minister John Swinney confirming that Scottish ministers were not consulted during the policy development process, despite providing suggestions to the UK Government.

SNP Higher Education Minister Graeme Dey also condemned the plans, reiterating calls for a Scottish Graduate Visa to allow international graduates to stay in the country for two years post-study.

“These most recent proposals demonstrate yet again that the policy approach to migration ignores the needs of Scotland or the higher education sector,” he said.

“International students, academics and staff make a vital contribution to Scotland’s world-class universities, helping to drive our nation’s prosperity.”

He added: “We are seeking clarity from the UK Government that the proposed levy on international students is intended to only apply to universities in England.”

A spokesperson for the UK Government said: “We will fully consult all the devolved governments, including the Scottish Government, on the implementation of the international student levy and will be setting out more details around this in the Autumn Budget.

“The analysis we’ve given so far of the potential impacts is based on the levy applying to English higher education providers only.”

Featured image via This is Edinburgh on Creative Commons