How the International Student Levy Could Support Regional Growth
This blog was kindly authored by Professor Adrian Wright, Martin Lowe, Dr Mark Wilding and Mary Lawler from the University of Lancashire, authors of Student Working Lives (HEPI report 195).
The Student Working Lives project underscores both the growing prevalence of student paid work and its significant influence on learners’ academic, social and financial experiences. The report also highlights the important economic, community and cultural value that students contribute to their local areas. In recognition of this, and in line with wider government and sector priorities, our report recommends how we can explore innovative mechanisms to incentivise institutions to better align student employment with regional growth ambitions.
As Government considers how to stimulate regional growth, and as expectations on universities to lead this agenda continue to rise, the proposed International Student Levy presents an opportunity for the Government to not only generate revenue but to act as a strategic lever for place‑based development.
The proposal
The Student Working Lives research shows that paid work, when effectively balanced with study, creates significant value for both students and employers. Students gain income, skills, experience, and confidence, while employers benefit from a motivated and flexible workforce.
Yet for many students, long working hours and poor‑quality jobs have detrimental effects on academic success. When done well, student-paid work delivers benefits across the whole system: students enhance their employability and financial stability; businesses strengthen their labour pipelines; and regional economies benefit from increased participation, productivity, and graduate retention. Despite this, the contribution of student labour remains largely invisible within existing funding and accountability frameworks.
At the same time, universities face substantial cost pressures while striving to remain accessible and responsive to local needs. To unlock the full potential of student work and ensure meaningful regional impact, the government must offer viable pathways to support the sector, and universities should focus on regional growth, capitalising on their role as a civic anchor.
Currently, the International Student Levy is proposed to function primarily as a revenue‑raising tool, and beyond its ambition to fund domestic student maintenance grants for the most disadvantaged students and skills initiatives. While the government’s technical consultation offered an opportunity for stakeholders to provide feedback on the process and administration, it didn’t ask stakeholders to consider how a clear framework would ensure that levy income benefited students, and their local regions. One way it could be re‑designed is to incentivise institutions that support high‑quality student-paid work and contribute to local economic growth
We propose that the International Student Levy includes a partial rebate to universities, based on the contributions student workers make to priority local sectors, aligned to Local Skills Improvement Plans, regional growth plans and Industrial Strategy priority sectors, resulting in a smarter, more productive way to harness internationalisation and global mobility for national benefit.
A targeted rebate would further incentivise universities to actively facilitate opportunities that support regional growth areas, embed employability support as a core part of the student experience and reinforce existing civic commitments.
How would this work?
While this represents an early-stage proposal that will need additional analysis and clarification to align with the existing levy framework, in practice, this approach would require the utilisation of existing reporting mechanisms. Institutions already capture key labour market data at enrolment, and careers services track the number and type of roles students secure during their studies. Linking this information to priority sectors would allow the government to allocate a proportional rebate to providers with the strongest place-based impact.
This data infrastructure could sit within existing mechanisms such as the Higher Education Business and Community Interaction Survey (HEBCIS), with funds distributed as an enhancement to the Higher Education Innovation Fund. Accountability statements would ensure transparency, track impact and help refine the model over time.
For universities, the incentive is powerful. Reinvesting part of the levy would strengthen employer partnerships, expand high‑quality student job opportunities, and ensure ring‑fenced support for employability programmes, an ambition already emphasised across the report’s findings. For government, the return is also clear: enhanced regional productivity, increased tax revenues, stronger graduate retention and crucially, a more resilient skills pipeline.
Long term regional development
Over time, as regional economies grow and local labour markets stabilise, reliance on the levy rebate would naturally diminish. But the long‑term benefits – better student outcomes, stronger civic partnerships, and improved social mobility – would remain. Innovative policy decisions, that don’t just redistribute costs, but reinvest in the places and people who drive growth are possible. A targeted rebate offers exactly that: a policy reform that turns student work into a catalyst for economic renewal.
Comments
Jonathan Alltimes says:
The Model.
What are regions and counties importing from outside of the UK? Economic growth as measured by output is the sum of volumes multiplied by prices over time. The volumes and prices of commodities are determined by sustained large-scale demand, where as the volumes and prices of innovations are determined by sustained (large-scale) supply. Output equals expenditure equals income, over time. How can we stimulate sustained large-scale expenditure in a region and country? In a closed economic system, expenditure would occur elsewhere in the UK and would then be amenable to redistribution. How can expenditure be redistributed from wealthier regions and counties via private sector demand? Or, how can we stimulate regional and county expenditure via industrial and consumer demand? Employment is a function of expected supply over a number of years matched to expected demand over a number of years and innovation beyond a number of years: employment is determined by expected volumes and prices plus unknown innovation.
Universities can only improve employment within the sector by raising the volume of their outputs and their prices. Profit margins and therefore income can also be raised by cost efficiencies relative to static or rising volumes. What is proposed is a subsidy for student employment transferred to the university and so a cost saving, the subsidy could just as well be transferred to a priority sector employer, for example, as a development of the government Youth Jobs Grant. What can the university do that the employer can not? The International Student Levy is intended to benefit subject-specific national priorities tied to employment in sector-specific national firms. The argument is best tempered by data about Lancashire, which is unknown or unpublished.
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Lloyd Williams says:
The metrics on student employment within institutions unlikely to be as consistent as your proposal suggests. In broad terms though its likely to be retail/hospitality/care for the supplementary income.
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