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Westminster incompetence threatens Scotland’s £1.94 billion boost from international students

Written by Claire Elliott

Westminster incompetence threatens Scotland’s £1.94 billion boost from international students and £834 million in tax from international graduates.

That international students benefit Scotland’s economy will come as no surprise to most. They contribute fees to our universities, taxes, shop in local businesses, and add to a vibrant cosmopolitan culture. The benefits of Scotland’s proportionately large number of international students are numerous. These benefits are under threat from UK government policy and Brexit which are extremely damaging to Scotland’s future economic prospects.

This is why Scotland needs the power to implement policies to encourage international students to come to Scotland to study and work.

The benefits of international students

Scotland has the highest percentage of international students anywhere in the UK: in 2016/17 22% of all students were from a country outside of the UK. Of this 41% come from non-UK EU countries and the remainder from the rest of the world.

In a 2018 report, the Higher Education Policy Institute (HEPI) estimated the net effects of international students to the Scottish economy.  They concluded the net contribution of the 2015/16 cohort alone to the Scottish economy was estimated to be £1.94bn.  This means that net income gained from international students to Scotland is more than six times higher than the cost of educating them.

Scotland’s international students also have the highest net economic impact per resident outside of London. The analysis found that Glasgow especially benefits from international students with each international student’s net contribution to the economy is £1,480 on average (£135 million in total).  This is unsurprising to anyone who has walked around Glasgow and seen the large number of local businesses that are supported by the student population.

The ongoing benefits from international graduates

HEPI’s report only covered those costs and benefits of those currently studying, and not those who stay to work after graduating. International graduates who decide to stay and work in Scotland are hugely valuable to the Scottish economy.

One of the ways which they contribute is through paying tax. In a report from March 2019, HEPI estimates the total UK tax receipts for one cohort of international students as £3,173 million.

The HEPI estimate only uses statistics from English universities and extrapolates Scottish results based upon the assumption that post-graduate labour market outcomes are the same across the UK. Scotland’s student population in 2016/17 was 12% of the UK total. Therefore making the same assumptions as the HEPI report does, we can estimate that Scotland gained £834 million in tax from international graduates in one year alone.

This figure does not tell the whole story as it only calculates the first ten years of post-graduation only which underestimates the lifetime economic impact of graduates. This is especially relevant considering that earnings tend to go up as people get older, meaning more tax receipts after the initial ten years, as well as the knock-on effects from international graduates’ children.

International graduates also typically find employment in sectors that suffer from skills shortages with little evidence found by HEPI that they displace domestic graduates.

Scotland has a unique need for migration.

These graduates are also valued from a demographic perspective. Given the National Records of Scotland’s (NRS) findings last month, that birth rates in Scotland are at their lowest rate since records began in 1855, it is important that Scotland is able to continue to attract young and qualified people.

The NRS also predicted that all of Scotland’s population growth over the next 25 years will come from migration. UK government policy has continuously undermined this. See our blog for more on this: EU immigration is vital for Scotland’s future prosperity  

Impact of UK government policy

In 2012, the UK government removed the post-study work visa from international students which allowed two years visa-freefree work. The report contends that this change, introduced to prevent abuse, has resulted in a decline of international students coming to the UK as well as a decline in those seeking to stay in the UK post-graduation. These are estimated to have cost the UK Exchequer tax revenues of £150 million per year

Impact of Brexit

All types of Brexit will negatively affect Scotland’s economy more than the rest of the UK.

If the UK government ends free movement of people, the NRS report predicts that Scotland’s working age population could decline by up to 5%, with 63% of workers in Scotland earning less than the proposed £30,000 post-Brexit salary threshold for skilled immigrants.

Home Office preparations for a no deal Brexit are also extremely out of touch with Scottish realities. In the event of a no deal, the Home Office has said it will offer EU students temporary leave to remain in the UK for three years. University of Glasgow Principal, Sir Anton Muscatelli has said that was “crass” because Scottish degrees usually take four years.

Anton Muscatelli argues that the university sector will be one of the hardest hit by Brexit:

University of Glasgow campus

“more and more young research students are turning away from the U.K. Russell Group figures show that there was a 9% fall in non-British EU students starting postgraduate research courses in 2017-18 – so a 9% fall in young, talented researchers who want to make the UK the base for what could be their genuinely world-changing work in the years to come.”

The solution

The abysmal treatment of the international student community demonstrates the need for a Scotland specific policy. 

The Fresh Talent initiative, which ran between 2005-8, aimed to establish a policy adapted to the needs of Scotland by allowing graduates to remain for up to two years. Although this scheme was seen as a success, with 7,620 non-EU students being granted visa extensions under this scheme, it was still administered by the UK Border Agency which did not see the initiative as a potential stepping stone to settlement.

The Scottish Government Post-Study Working Group has proposed a sponsor model for graduates through universities but it is unclear how this would be resourced in a time of university budget cuts.

What is clear is that Scotland needs a migration policy which attracts more, not less, immigration. We also need to ensure that people who come here for study feel welcome to stay and to innovate.

That is why Business for Scotland has suggested a graduate business start-up programme aimed at retaining young talent in Scotland. This would take the form of a redeemable voucher for all graduates of Scottish Universities and colleges after graduation, to help them return and establish a business in Scotland within ten years of graduation.

Beyond this, the Scottish Parliament needs to have control of immigration policy to ensure that it can tailor policy to Scottish needs instead of being party to an economically catastrophic Brexit and a hostile environment to immigrants.

Photo credit

EU immigration is vital for Scotland’s future prosperity

About the author

Claire Elliott

Claire is a political science graduate of the Central European University with a particular interest in EU politics and environmental issues. She is an economics and policy research executive with Business for Scotland.

1 Comment

  • Someone, please turn this into a 60-second video that everyone from the youngest to the oldest can understand – if we don’t do it with the facts we’ll never educate enough people!

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