|Practice area:||Education and Labour Markets | Labour markets|
|Client:||Department for Education|
|Published:||8 February, 2021|
|Keywords:||impact assessment Cost-benefit analysis Education and labour markets Financial Modelling Labour markets quantitative modelling report|
London Economics were commissioned by the Department for Education to undertake an analysis of:
- The price elasticity of international student enrolments with respect to changes in the level of tuition fees charged – separately at undergraduate and postgraduate level, and for EU and non-EU domiciled students.
- The potential impact on first-year EU student enrolments and associated tuition fee income for UK higher education institutions (HEIs) resulting from:
- The removal of tuition fee loan and grant support (where applicable) for EU students;
- The harmonisation of tuition fees charged to EU and non-EU students (i.e. the de-coupling of EU and Home fees);
- ͏͏Changes to the post-study work rights for EU students to those of non-EU students; and
- ͏͏Changes to the rights to bring dependants for EU students to those of non-EU students.
Across all higher education institutions, the analysis suggests that:
- Removing the tuition fee support for EU-domiciled undergraduate students would reduce demand for UK higher education by approximately 13,090 (21% of all EU student enrolments) first-year students per year, equating to a loss of £80.7 million in tuition fee income.
- Removing the Home fee status for EU-domiciled (undergraduate and postgraduate) students would generate additional fee revenue of approximately £114.6 million. That is, the increase in fees charged to EU-domiciled students would more than offset the loss in fee income due to falling demand amongst EU students (15,220 students, 24% of EU-domiciled student enrolments in 2016/17).
- Restricting the right to work in the UK post-graduation for EU-domiciled students would potentially result in 6,640 (11% of EU-domiciled student enrolments) fewer EU student enrolments, corresponding to a reduction in fee revenue generated by UK HEIs of £88.0 million.
- Restricting the right to bring dependants for EU-domiciled students would further reduce tuition fee income by approximately £8.4 million, with 590 (1% of EU-domiciled student enrolments) fewer enrolments.
- Taken together, the estimated combined impact of all of these policy changes would be to reduce tuition fee income from EU sources by approximately £62.5 million, with 35,540 (57%) fewer first-year EU enrolments. However, the aggregate impact on fee income masks significant variation by university cluster (and level of study). In particular, HEIs in Clusters 1 would benefit in aggregate; whereas, institutions in Clusters 2, 3 and 4 would be worse-off.
The results on student enrolments are insensitive to changes in classification of HEIs by clusters, with the reduction in demand varying from 34,555 (55%) to 35,750 (57%). The total financial loss ranges from £42.5 million to £66.5 million