Universities and the EU: Capital flows

Date: 06/03/04

More EU students for British universities after enlargement will mean more competition for places and more subsidy from taxpayers

NASTY, nice or very expensive. What you make of the effect of European Union (EU) enlargement on British higher education depends on who you are.

At present there are nearly 50,000 full-time EU undergraduates in Britain. Only 12,000 Britons, including post-graduate and short-term exchange students, go to universities in other EU countries. Unlike most foreigners, who pay full fees, EU undergraduates pay only £1,125 a year (less if they're poor). Adding in the subsidy paid to universities by the Treasury, that costs the taxpayer an average of £3,750 for each EU undergraduate - or £188m altogether. After May 1st, the same deal will apply to eight ex-communist countries of eastern Europe, plus Malta and Cyprus.

From the universities' point of view, that's good. Students from the existing EU cost the same to teach, but are “disproportionately able and motivated”, says the head of one Oxford college. When the pool of potential applicants widens to include Estonians, Poles, Hungarians and the like, there will be even more talented students to choose from. The east Europeans tend to be particularly strong in the maths skills needed for science and engineering courses, where British students are particularly weak.

According to a report from the Higher Education Policy Institute (HEPI), a thinktank, to be published on March 6th, there will be between 12,000 and 19,000 extra undergraduates from the new member countries by 2010. That will stiffen the competition to get into the best universities: the brightest students from the new EU countries will be the most likely to want to study abroad. If the cost is much the same everywhere, they will be most inclined to choose places like Oxford, Cambridge and the LSE over less famous outfits. Depending on how many new places the government creates by then, the competition may be tougher at middling universities too.

That alone will prompt squawks of protest. But the real costs to the government could be a lot higher. When new tuition fees of up to £3,000 take effect in 2006, all EU students will be eligible to borrow this amount through the state-run student loan scheme. But collecting a debt of £10,000-odd from someone who has returned to, say, Slovakia, may be quite tricky. The government says it is working on bilateral agreements with student-loan outfits in other countries where they exist; if necessary it hopes to recover money through tax systems abroad. It regards this as feasible by 2010, when the first repayments become due. Some observers think this wildly optimistic.

The biggest danger, though, is in a case currently before the European Court of Justice, where a French citizen, Dany Bidar, is arguing that EU students should be entitled to the same grants and loans paid to Brits with low incomes. These will mushroom after 2006 to make the new tuition fees more palatable. The British government argues that aid to poor students is a social benefit, not an educational one. The court tends to favour arguments based on equal treatment of all EU citizens over those based on national sovereignty. Judgment is expected by early 2005.

Given how poor the new EU countries are, if Britain loses, at least half, probably more, of the new applicants would be eligible for the money intended for disadvantaged Brits. The combined grant, maintenance loan and tuition-fee loan for a poor student studying in London will be around £10,000 a year by 2008.

A grim picture, then? Not a bit of it, argues Libby Aston, author of the HEPI report. For a start, EU students spend on average £7,500 a year when they are here; those that work pay taxes on their income. Around a quarter stay on and get a job after graduating. The tax they pay will more than make up for the taxpayer-subsidised tuition and loans, she argues.

Ms Aston's view chimes with top policymakers' thinking. They want Britain to become the “higher education capital of Europe”. But that will not come free. And it will make it even harder for the dimmer children of the British middle classes to have what they have come to see as their birthright - three subsidised years at a well-known university.

More EU students for UK universities after enlargement will mean more competition for places and more subsidy from taxpayers.

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