£3.2 billion of tax from each cohort of international students who stay to work in the UK

International students

Just one cohort of international students who stay in the UK to work pay £3.2 billion in tax – and they aren't taking jobs from UK citizens. That's the headline from new research commissioned by the Higher Education Policy Institute (HEPI) and Kaplan International Pathways (Kaplan), launched today (21 March 2019). Nick Hillman, Director of HEPI, digs further into the research.

Most policy issues are nuanced because most policy issues involve trade-offs. More money for your priority is likely to mean less money for my priority. A new regulation might help a group you care about but reduce opportunities for a group I care about. A tax break could promote your favoured activity but place a new financial burden on mine.

The debate about student migration is different. It is not about trade-offs because there is little downside. Welcoming more international students helps, rather than hinders, other priorities. In two decades of public policy work, I have not come across any other core issue where so many of the good arguments are on one side of the debate and so few on the other.

  • Students like learning alongside people from other countries because they regard it as providing them with 'a better world view'.
  • Academics find it more rewarding to teach diverse student group, in which people from different cultures interact and more ideas bounce around.
  • The public, while sceptical of migration in many ways, recognise the contributions made by international students.
  • Universities benefit because higher education is more effective when national boundaries do not obstruct scholarly work.
  • For government, hosting international students acts as a glue that binds our country more closely to other places.

International students also, of course, bring major financial benefits to the UK. A year ago, with Kaplan and London Economics, we produced work showing the huge financial benefits for the whole UK of hosting international students. They are worth over £20 billion a year to the UK, which is ten times the costs of hosting them, putting the lie to any claims that international students cost the UK more than they contribute.

Anyone who focuses on such numbers risks attack for commodifying education – just look at how Twitter responded to last weekend's new International Education Strategy. But it is possible to be impressed by the financial numbers while simultaneously believing education is more important than money. Moreover, as more money enables more education by making more courses viable, the two things are intertwined. With more money, the quantity, breadth and quality of education tends to improve.

If we are honest, one crucial piece of evidence has been missing, however. The higher education sector thinks the country benefits when international students stay in the UK to work. On the other hand, government policy restricting the rights of former international students to stay in the UK to work is based on a hunch that they fill jobs that could otherwise be filled by British citizens.

Last year's Migration Advisory Committee report claimed there is a rough-and-ready evidence base for this. They also opposed the liberalisation of post-study work rules because they feared it would lead to abuse: 'A post-study work regime could become a pre-work study regime.'

If the MAC's fears were rooted in secure evidence, having a tighter post-study work regime than exists in other countries might – just – conceivably be justified. In that scenario, it could make sense to try and ensure only the brightest and best international students stay in the UK to work. But we can now comprehensively prove this is not so.

HEPI and Kaplan International Pathways commissioned London Economics to crunch the numbers. Their research shows the small proportion of the 2016/17 cohort of international students who choose to stay in the UK very often earn more than others and will contribute £3.2 billion to the Exchequer in tax in the first decade after graduating. That is a lot of money to spend on national priorities. It is enough, for example, to increase UKRI's budget by 50%, which would be help us hit the national target of increasing spending on research and development to 2.4% of GDP.

The research also shows international students who stay here to work tend to work in areas with skills shortages. Politicians may play populism by promising 'British jobs for British workers' but the argument is largely irrelevant when it comes to international students. Our new research also puts an annual £150 million figure on the cost of the 2012 restrictions on post-study work – that is £1 billion in foregone tax receipts already. In total, £1 billion is enough to pay for 15,000 hip replacements or to create 10,000 new secondary school places.

The government's brand-new target for £35 billion of educational exports by 2030 is welcome. But it is, confusingly, both less ambitious than the last target set in 2015 and incredibly challenging thanks to Brexit. It seems certain that some bold new policies will be necessary to hit it. So it is time to dust off the worked-up ideas from Universities UK and others for a big improvement in post-study work arrangements.

Read HEPI and Kaplan's new research in full: The UK’s tax revenues from international students post-graduation 

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Phil Harvey
Phil Harvey says:
21 March 2019 at 16:39

Well said Nick!  Although you'll forgive me for not popping corks just yet given our former Home Secretary and current PM's track record iof listening and acting on overwhelming evidence in this space.  

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