Just as universities are being placed at the heart of regional growth through the Government’s Devolution Bill, a new levy on international students risks cutting against that ambition. The tension between national reforms and regional ambitions could undermine the very role universities are being asked to play in driving local prosperity.
The UK Government has proposed a 6% levy on international student tuition fees under its ‘Restoring Control over the Immigration System’ white paper in May 2025. The proposed aim is to reinvest the revenue into the higher education and skills system.
Yet as Financial Times has reported, the impact will fall most heavily on towns and cities outside the South East where universities are central to local economies. In Exeter, for example, 15.3% of export value derives from international students’ fees and spending; in Leicester, the figure is 14%. Such places risk seeing local growth plans undermined by a policy framed at national level.
At the same time, changes to graduate visas add to uncertainty in the international student system. Universities already operate under strict sponsorship rules that require them to check qualifications, verify finances, monitor attendance and report concerns. The issue is not weak compliance but gaps in immigration law and a funding model that has been frozen for more than a decade.
The financial picture is already tight, with domestic tuition fees only marginally increasing in 2025, leaving most courses taught at a loss. Reliance on overseas income is not negligence but the inevitable result of the current settlement.
As a result, some universities are already exploring mergers, alliances and new models to stay afloat. Diversification can and should reduce dependence on international fees, but it needs to be planned and supported through a sustainable funding framework. Without that, restructuring will be uneven and the costs will fall on students, staff and local communities.
Friction between immigration and devolution agendas
The proposed levy comes at a significant moment, with the English Devolution and Community Empowerment Bill scheduled to pass through to committee stage on 16th September. The Bill, introduced in July 2025, was designed to bring localism into the centre of decision-making and to embed universities within regional growth strategies, from co-designed courses aligned to local labour markets to anchor roles in regeneration.
While the departure of Angela Rayner may have made the Bill’s next steps less certain, the proposals clearly make universities central to regional growth. That makes a levy that reduces the economic viability of universities, appear counterproductive.
National reforms should be stress-tested for regional impact before they are implemented. A levy that appears fiscally sensible from the centre can translate into lost jobs, cancelled courses and stalled regeneration in cities where universities are the main source of high-skill employment and export value.
Immigration and higher education policies should go hand in hand, not butt heads. Universities cannot meet stricter sponsorship duties while absorbing the reputational risk created by gaps in immigration law and then be penalised again through fiscal measures that reduce the resources available to manage those duties.
If the government wants to reduce the proportion of our student populous that comes from overseas, then it needs to fundamentally reset the higher education funding model so that domestic teaching is viable in its own right. If a levy proceeds, its design should be transparent, time-limited, and tied to outcomes that genuinely strengthen the sector’s resilience, including incentives for planned diversification and safeguards for research capacity.
None of this argues against reform. Universities understand that the present model is fragile and that change is necessary. The question is sequencing and design.
A levy can only work if it is embedded within a governance framework that aligns national objectives with regional realities, that balances competitiveness with stability, and that recognises universities as both local anchors and global assets. Without that framework, policies intended to secure the future of higher education risk undermining it.
Universities are ready to play their part in a joined-up strategy. It is now up to central government to ensure that national policies support the ambitions being built in our towns and cities so that higher education and devolution pull together rather than apart.
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