Source · Select Committees · Public Accounts Committee
Recommendation 4
4
We are concerned that the financial sustainability of some providers is being put at risk...
Recommendation
We are concerned that the financial sustainability of some providers is being put at risk by their heavy dependence on their ability to continue growing overseas student numbers. Many providers are already highly dependent on cross-subsidy to make up deficits in publicly funded teaching and research. Much of this subsidy comes from income from overseas students’ fees; in 2019–20, there were more than 340,000 overseas students at English providers, almost half of whom came from China or India. Many providers’ medium- and long-term financial forecasts assume continued growth in student numbers, particularly overseas students. The OfS monitors providers’ forecasts and has in the past found their student number projections to be over-optimistic. There are also risks associated with an over reliance on international recruitment which may not align well with the UK’s wider geopolitical interests. The Department asserts that it is aware of such risks and is encouraging the sector to diversify in terms of where providers recruit their students from. There are also cross-government considerations, such as how student recruitment is affected by, and potentially at odds with, the Home Office’s plans to control migration. The Department recognises that it is a very competitive market and that there are many countries around the world seeking to bring in more international students, for exactly the same reasons that UK providers are. Recommendation: The Department, drawing on OfS analysis as appropriate, should set out what it considers to be the risks to achieving the continued forecast growth in overseas student numbers universities are relying on for their future financial security, and explain how it is mitigating those risks. Financial sustainability of the higher education sector in England 7
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 The department recognises that the financial sustainability of the higher education sector depends on the continuing contribution made by income from overseas students, if not necessarily on the growth trend as currently forecast. Many factors affect overseas students’ decisions about where to pursue higher education, ranging from geopolitical developments, through public health issues, to students’ behavioural changes. No government could mitigate the full risk of such factors, but through the International Education Strategy (IES) and the 2021 update, the government has established a thorough approach to promoting higher education to overseas students and mitigating risks associated with providers’ dependence on overseas fee income. 4.3 The IES is committed to growing the value of education exports to £35 billion and to hosting at least 600,000 international higher education students in the UK per year by 2030. The international students ambition of 600,000 was met for the first time in 2020-21, with over 605,000 international students studying in the UK. 4.4 The IES sets out the government’s ambition to enhance the entire international student experience, from application to employment. It also makes clear that the diversification and sustainable recruitment of international students remains a key strategic priority for the sector. 4.5 It is a matter for higher education providers, as autonomous bodies, to forecast sensibly when planning for their financial sustainability. The OfS monitors this, including reviewing forecasts for optimism bias amongst providers. The department and the OfS continue to work closely together in considering financial risks facing the sector. Updated analysis of those risks will continue to inform departmental strategy.