Foreign students fear "Britain is closed for business"

Universities UK head Steve Smith supported the government's tuition fees rise but he fears the immig

Before the general election, few expected higher education to be one of the defining issues of this Parliament. The subject was not mentioned in any of the three leaders' debates and, with the exception of the Liberal Democrats, was rarely raised by politicians on the campaign trail. In what amounted to a conspiracy of silence, both Labour and the Conservatives sheltered behind the Browne Review when asked if tuition fees would rise.

But the issue has since provided some of the most memorable moments of the coalition's time in office. The decision to raise the cap on fees to £9,000 destroyed Nick Clegg's political reputation and led to the greatest civil unrest since the poll tax riots of 1990. The higher education bill was eventually passed by a slim majority of 21 votes in December, with ministers promising that universities would only charge £9,000 a year in "exceptional circumstances". But since then, 69 have announced their intention to do so. Consequently, the government faces a student loans bill hundreds of millions of pounds higher than expected and there are widespread fears, not least among the Lib Dems, that poorer pupils will be deterred from applying.

As the president of Universities UK since August 2009, Steve Smith has represented the sector throughout one of the most tumultuous periods in its history. Now, as he prepares to step down from the post at the end of this month, he is reflecting on what the government's radical reforms mean for the future of higher education.

I met Smith, a gregarious man who resembles Dr Marvin Monroe, the psychotherapist from The Simpsons, in his office at Exeter University, where he is the vice chancellor. I began by asking him if he was more or less optimistic about the future of the sector than when he started the job. "In truth, I'm actually more optimistic," he said. With both Labour and the Conservatives promising large cuts in funding, Smith expected universities to receive less money. In fact, as a result of the tripling of fees, they will now receive more.

"It's a different route that the money comes from but we end up with 10 per cent more in 2014 than we had 2010." He "completely opposed" the 70 per cent cut in university funding but soon realised that "you have to move on and do the best you can."

The fact that David Willetts dramatically underestimated the number of institutions that would charge £9,000 has led some to suggest that the universities minister, nicknamed "two brains", may not even have one. Isn't he guilty of incompetence at best? "The last thing Willetts is is incompetent," Smith replied. "The 'exceptional' comment, I'm sure they now regret. But I do think you have to understand the febrile nature of the politics of the coalition." The most selective institutions, he pointed out, are using fee waivers and bursaries to protect the poorest.

Under the Willetts model, money will follow the student, meaning that some universities dramatically expand, while others shrink. Is it conceivable, I asked Smith, that some institutions will go bankrupt? "To be candid, ministers from all parties talk about the rigours of the market, my experience is that they never live up to it in practice." In some communities, he pointed out, the university is one of the largest, if not the largest, net contributors to the economy.

"I don't think they'll let institutions go bankrupt because I think they'll work out what it would mean for the local economy." Like the banks, the universities, it appears, are too big to fail.

Smith, the first person in his family to go to university, told me at one point: "I care deeply about social mobility and that energises me more than anything else." He once recalled his parents being upset by a form master who told them: "People like you don't go to university."

Having "lobbied hard" for the fees increase does he now fear that poorer pupils will be deterred from applying? "If lower socio-economic class participation goes down, we've made a major mistake," Smith conceded. But for now he is optimistic. The earlier increase in fees from £1,000 to £3,000 actually coincided with a rise in the number of students from poorer backgrounds, he reminded me.

The real issue, we agreed, is which universities these students go to. Two days after our meeting, a new Sutton Trust report was published showing that five schools in England sent more pupils to Oxford and Cambridge over three years than 2,000 others. So, to quote Lenin, what is to be done? "We think the only way to get kids from lower socio-economic groups with high ability into universities is to use contextual data," Smith told me.

If you've not heard the phrase "contextual data" before it's because it is invariably referred to by the media as "social engineering". Yet all it means is taking into account a candidate's background and education when offering places. The director of undergraduate admissions at Oxford, Mike Nicholson, insists: "A bright student is a bright student is a bright student ... it doesn't matter what their school or educational background is, the interview will allow us to pull that out." It is this dogmatic stance that Smith loathes. Research by Bristol University, he pointed out, found that "a state school student from a school that doesn't do very well, coming in with three Bs, will outperform, on average, a student coming in with AAB from an independent school." In other words, it's not ability that counts but potential.

Although he praised Nick Clegg's "terrier-like" commitment to social mobility, Smith said he was disappointed by the "very weak" reference to contextual data in the higher education white paper and that he feared allowing allow institutions to expand to take on more AAB students would penalise bright state school pupils. "The nightmare scenario would be "universities must hit their targets" but you can't use contextual data and we're going to take away the students below AAB by a certain amount each year. That's a car crash."

Unusually, the white paper was presented to the House of Commons by Willetts, the universities minister, rather than Vince Cable, the Secretary of State for Business and the man officially responsible for higher education policy. Even the Speaker was caught out, mistakenly calling Cable to the dispatch box before Willetts's statement. Has the Business Secretary subcontracted universities policy to his deputy? "Frankly, it is indeed Willetts that we do all the discussions with," Smith told me. "Our reading of it is that he [Cable], in essence, leaves Willetts to deal with the universities situation."

He added that Cable is "far more minded to push back on cost" than Willetts. "Before he came into office, the Secretary of State did say that he thought there were too many students and that there should be more apprenticeships. Willetts doesn't think that for a second."

For Smith, the real divide is not between those who support tuition fees and those who oppose them but between those who believe more people should go university and those who believe fewer should. On that issue, he said, there is no longer a Manichean divide between Labour and the Conservatives. "I don't go from a meeting with Willetts to a meeting with [John] Denham and think I'm in two different universes." But he warned: "If we lost Willetts and he was replaced by a more right-wing figure you could see it going a different way. Willetts wants more people at university, not everyone in the Conservative Party agrees with that."

Unlike their English counterparts, Scottish students continue to enjoy free higher education, courtesy of Alex Salmond's SNP administration. However, while Scottish universities are legally obliged to also offer free entrance to European Union students a loophole means that they are able to charge English students fees of up to £9,000 a year. Does Smith think the UK government should intervene?

"That announcement shocked me," Smith said. "They [the SNP] had made such principled statements in the past about how iniquitous fees were and then they announced that they were going to allow institutions to charge £9,000." He added: "I suspect the government will do something ... It does seem very odd to me that someone can come from France and get the same terms as someone in Scotland but if they come from England they pay £9,000. That seems to me an anomaly that can't stand in the long-run."

Foreign students contribute an estimated £8bn to the economy each year and, despite the concessions ministers have made on student visas, Smith fears that the government's anti-immigration rhetoric will deter them from applying. "On every single international visit I've been on this year it's been the only issue that's been discussed ... I did a big conference at the British Council in Hong Kong, I was with Clegg in Brazil. In both those meetings the question was: "Is Britain closed for business?"... Although we won, the damage inflicted by what was said was significant."

As Smith lamented the government's illiberal approach I was reminded that George Osborne boasted in his most recent Budget that Britain was now "open for business". Not all of his intended audience, it seems, agreed with him.

Throughout our conversation, the point Smith returns to, with a laser-like focus, is that the government's reforms will stand or fall based on whether they widen participation. "It would just be a nightmare if the outcome of all this was that rich people went to the top universities and poor people went to colleges where they got ripped off," he told me.

He is confident, if not certain, that he has made the right judgement in backing the fees rise. "I'm either stupid, I'm hypocritical," or, he said, "I'm right." As the government embarks on the biggest revolution in higher education for nearly fifty years, with unknown consequences, one expects that Willetts has had exactly the same thought.