Wednesday 25 June 2014

Risky business

It’s horror show time again as immigration controls on international students, and alleged fraud in some components of the student visa system, hit the headlines: here’s the Times’ Higher’s take on the statement by the Immigration Minister yesterday, and here’s the BBC’s.

There’ll be acres of newsprint (and amps of webpages? what’s the digital equivalent of ‘acres of newsprint’?) on the details of the story, and I’m not going to try to compete in this blog post. But I do want to pose a hypothetical ‘what-if’ question. What if overseas students stopped coming to the UK? Specifically, what would happen to university finances?

Well, obviously, there’d be no overseas fee income. And this amounted to over £3.5 billion in 2012-13. That’s no small beer. But equally, there’d be no costs associated with teaching those students, so it isn’t as simple as taking £3.5 billion off universities’ income.

The TRAC data give us a way to estimate the underlying effect. According to HEFCE’s latest TRAC figures, non-publicly funded teaching in 2012-13 brought in an income of £3.281 billion and the full economic cost of delivering that teaching was £2.466 billion. This means that the teaching cost about 75% of the income; or, conversely, that about 25% of the income was a direct contribution to institutional surpluses.

Of course that’s a sector average, and the detail will inevitably vary across individual institutions, but it’s not bad as a first estimate. I used this proportion to model what would have happened to 2012-13 university surpluses if there’s been no overseas students, no overseas fees, and no costs to teach those students. (That is, I took the 2012-13 reported surplus for each institution, and subtracted from it 25% of the overseas fee income for that institution).

The chart shows the results. The vertical axis is the number of institutions in surplus or in deficit; the left hand bar shows the actual 2012-13 data; the right hand bar shows the modelled data without overseas fees or costs.

So as things stand, 19 out of 161 institutions which report to HESA had a deficit in 2012-13. If there hadn’t been overseas fees and costs, 63 out of 161 would have shown a deficit. The net total surplus in 2012-13, across all institutions, was just over £1,083 million. Without the contribution from overseas fees it would have been just under £206 million.

Now, as Patsy the horse said to King Arthur, in Monty Python and the Holy Grail, when they had just seen Camelot, “it’s only a model” (link opens in You Tube). The real world would not be like this, and there’s lots of reasons why the estimate I’ve made wouldn’t be specifically right. And the likelihood of all overseas recruitment simply stopping is very low indeed, I would say. But the model reinforces a hard truth.

And that hard truth is that uncertainty about overseas student recruitment is a very real and quantifiable risk for UK universities. A financial risk but also, let’s be clear, a risk to the reputation of the sector and the experience of student and staff in the universities. The presence of overseas students broadens UK students’ horizons, by enabling them to learn alongside people from other cultures and backgrounds; and universities are more interesting and cosmopolitan places because of overseas students. Long may it continue.

Let’s hope that the specific issues raised by James Brokenshire and the BBC Panorama programme are resolved. And let’s also hope that the politics of immigration, and the politics of the coalition government and electoral cycle, don’t conspire to damage a really important feature of UK higher education.

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