Foreign students are classed as immigrants, a group which the government treats with contempt. Photo: Getty
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The government must stop treating international students with hostility

This year, the number of foreign students undertaking higher education in Britain fell for the first time since 1983. The government must stop treating them with contempt.

Aung San Suu Kyi, Bill Clinton, Desmond Tutu, Mahatma Gandhi. Each one of them has shaped the world in which we live and, as it happens, every one of them was educated here in Britain.

Along with the United States, the UK’s universities are the finest on the planet. The ability that this gives us to attract the world’s talent to these shores represents not only an enormous economic opportunity but also a crucial component of our nation’s cultural strength. It is something I have been proud to observe in recent months as the newly appointed chancellor of the University of Birmingham. 

I came to the UK from my birthplace of India because of the outstanding quality of its higher education institutions, but it was Britain's internationalism – its unique role as a point of congregation for ideas and creativity from around the globe – that allowed me to start Cobra Beer here.

And yet despite the mutually beneficial historic relationship between the UK and international students, this government continues to badge them as immigrants, a group it treats with a contempt bordering on outright hostility. 

That's despite new research from Universities UK, which found that only 22 per cent of the British public considers overseas students to be immigrants. Political leaders from the Deputy Prime Minister to Lord Heseltine have added their voices to the call for international students to be removed from the immigration figures. And yet the Home Office still refuses to take action, despite the evident failure of its crude policies towards controlling net migration, shown recently to have risen by 68,000 in the last year.

Net migration may be rising but one vital statistic is going the other way, with potentially severe consequences. This year the number of foreign students undertaking higher education here in Britain fell by 1 per cent – the first time a decline has been recorded since 1983. With government-sponsored poster campaigns barking “go home or face arrest” and the disastrous, failed proposal for “high risk” visa applicants from nations like Sri Lanka, India and Pakistan to pay a £3,000 "security bond" deposit upon entering the UK, it’s little wonder that the world’s brightest and best are starting to look elsewhere.

Indeed, an NUS poll carried out earlier this year recorded that 51 per cent of international students found the British government “unwelcoming”. That damage is being done to Britain's reputation on the world stage as a home for the future talent on which our economy increasingly depends couldn't be more clear. 

And while the government is helping promote a climate of hostility against overseas students, the Universities UK research clearly demonstrates that this does not reflect the public mood. 59 per cent of respondents to the survey said that the government should not reduce numbers of international students, even if such action made reducing overall immigration numbers harder. 

Our universities are competing in a zero-sum game of global proportions and every engineer, programmer and aspiring entrepreneur that we turn away will be welcomed with open arms by the likes of Canada, Germany and Australia. Given that the Department for Business, Innovation and Skills estimates overseas students contribute more than £13 billion to the UK economy, that is a prospect we should all be extremely worried about.

For years the government has been ignoring the well-founded requests of colleagues within the House of Lords and many more besides, to remove international students from the immigration statistics. Now the public has spoken too; and it is time the government started listening.

Lord Bilimoria CBE is founder and chairman of Cobra Beer, a crossbench peer and chancellor of the University of Birmingham

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.