New modelling shows that the Russell Group would save £100 million if the government opted to charge English universities a flat fee under the proposed international student levy, but the switch from a percentage tax would mean other institutions would fare considerably worse.

In a move that could further divide the sector ahead of more details on the policy being outlined in next week’s autumn budget, ministers are said to be deciding between charging a flat £1,000 fee per international student instead of the 6 per cent charge previously envisaged.

Analysis of Higher Education Statistics Agency (Hesa) data by 51�Թ� has found that introducing a flat fee would disproportionately benefit elite, research-intensive institutions in England.

Under a 6 per cent levy, the sector would pay about £620 million – with half of this (£314.8 million) coming from the 20 English members of the Russell Group. Under a flat fee, the whole sector would save around £37 million, but that would be because the Russell Group would pay £100 million less.

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For instance, instead of a £41.5 million charge, UCL would pay £26.9 million. Imperial’s fee would fall from £21.3 million to £11.4 million. And the University of Manchester would pay £18.7 million rather than £27.3 million.

Yet because of their lower average tuition fees, less elite institutions, particularly the post-92 universities, would pay more. The private BPP University’s bill would almost treble from £8 million to £23.7 million. The cost to the University of Hertfordshire would rise from £11.5 million to £18.9 million, the University of Greenwich’s from £7 million to £11.5 million, and Teesside University’s from £4.9 million to £8.5 million.

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However, he added that a flat fee would be an “odd” way to implement the policy. “Our income tax isn’t flat rate to make sure rich people get away with paying significantly less, proportionately, than poorer people,” he said. “That’s not how other taxes work, so it feels to me like a slightly odd idea that’s been thrown into the mix at the last minute.”

And, while the idea of a 6 per cent tax was initially mooted by the government as an example only, Hillman argued it was unlikely to drop below that figure because it then wouldn’t raise enough to justify the effort required to collect it.

THE’s analysis included more than 190 English higher education institutions that had comparable data on Hesa student numbers and tuition fee income.

It shows that, overall, institutions outside the Russell Group would pay £305.4 million under a percentage levy and £368.1 million with the £1,000 option. For the average non-Russell Group member of Universities UK, this would mean their bill rising from £3.1 million to £3.7 million.

Although universities have generally presented a united front against the levy, the figures show different institutions have much to gain from lobbying for it to be structured in different ways.

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Costas Milas, professor of finance at the University of Liverpool, said a higher flat rate for top universities might make more sense but it was unlikely that the government would introduce a two-tier system.

Skills minister Jacqui Smith has been defending the levy this week, telling a conference run by The Sutton Trust that no one had come up with a better way of funding the reintroduction of maintenance grants, on which the government has committed to spending some of the proceeds.

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Speaking at the GuildHE conference the following day, the minister hinted that the money raised from the levy might not solely be used on student finance. She said that she hoped it could be used “more broadly to fund the skills system”, which “might be an opportunity for incentivising some of the change that we want to see in the system”.

Vanessa Wilson, chief executive at University Alliance, said her members were worried not only about the introduction of the levy but where future governments could take it.

“My biggest concern is having something baked into the system with politics like it is at the moment,” she said. “You’re giving people a lever in future that could be…really quite dangerous [because] you could just keep pushing it one way”.

Kate Wicklow, director of policy and strategy at GuildHE, said the levy “risks inequality in the system”.

“Smaller and specialist institutions should be exempt from the levy altogether,” she continued, “because they have carefully managed…cohorts and also we’re concerned [about] the extent of the administrative and bureaucratic burden.”

helen.packer@timeshighereducation.com, patrick.jack@timeshighereducation.com

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