UK Offers £450m a Year for EU Student Fees to Win Trade Deal

By Daniel Okafor

The UK government is prepared to pay up to £450m a year so EU students can study at British universities at domestic fee rates — but only if Brussels lets Britain into its planned Made in Europe industrial scheme, sources told the Guardian.

Ministers have drawn up plans to charge students from the continent the same fees as British students, and to compensate universities for the lost income. The cash is the price of entry to a protectionist EU industrial programme that would otherwise impose trade restrictions on non-member countries.

What is each side trading?

The trade is straightforward. The UK concedes on student fees. The EU opens Made in Europe, due to be finalised next year.

One person with knowledge of the talks said: "We are willing to give the Europeans what they want on fees, but we will have to get something significant in return. The biggest prize we are pushing for right now is access to Made in Europe, so there is a deal to be done there."

UK negotiators want a guarantee that British companies will be treated the same as EU firms under the scheme. Britain was originally excluded from the definition of "European" for its purposes, drawing warnings from the government and the UK car industry.

France, the principal opponent of British inclusion, shifted its position. Paris proposed that any country in the single market on 1 January 2020 could join, provided it accepts "dynamic alignment" on EU trade measures. That creates a problem: the UK charges much lower tariffs on Chinese electric vehicles than the EU does. Business secretary Jonathan Reynolds recently told the Guardian he would not set tariff policy under pressure from Brussels.

How big is the bill?

EU officials want their students to pay just over £9,000 a year instead of international fees, which can exceed £60,000. The demand briefly stalled negotiations this year; British officials said they had been blindsided by its inclusion.

Treasury officials have modelled costs under different discount levels and demand scenarios. Two sources who saw the costings said the most expensive case — domestic-level fees plus very high demand — reaches £450m a year. Another source said the true cost would likely be lower, and a government official called the figure "speculative".

Mark Corver, a university funding analyst and director at Campus Numerics, previously calculated the hit at £140m in the first year and £400m across a typical three-year course.

What has already been agreed?

Negotiators have worked for months on a package for the summit on 20 November. Agreement has largely been reached on emissions trading, agricultural products and a youth mobility scheme. Reports suggest up to 80,000 young Europeans could come to Britain to work, live and study. EU member states had demanded 100,000 to 150,000 places, with some pushing for no quota at all.

The two sides are also close to granting Britain access to European biometric databases, which could help track asylum seekers. EU diplomats say the top UK target is Eurodac, which holds fingerprints of asylum seekers from the age of six. They warn the database was not built for law enforcement, and sharing data with a non-EU state may not win support from all members.

Britain is also seeking access to Schengen Information System II, which tracks fugitives, missing persons and stolen goods with real-time cross-border alerts. EU migration commissioner Magnus Brunner had been due to meet home secretary Shabana Mahmood in London two weeks ago; after a last-minute cancellation, officials at the Cabinet Office and the European Commission continue the work.

What happens at the 20 November summit?

A first draft of the joint statement goes to EU ambassadors on Wednesday, with room for changes until 20 November. It includes fresh commitments to end small boat crossings in the Channel. Student fees and Made in Europe access remain the two open hurdles.

Ten days ago, with talks deadlocked, the EU discussed "decoupling" the fee question from the summit statement entirely and deferring agreement by six months. EU diplomats still hope a deal lands, to clear ground for what one called "the real reset".

Prime Minister Andy Burnham wants the summit to demonstrate closer EU ties and to lay out future options, including full re-entry. Former chancellor Rachel Reeves, in a Harvard speech on Monday, will say Britain's "economic interests, common values and basic geographical reality all point towards Europe", and that the government must "prove to the public the benefits of a closer relationship and prove to Europe that we are serious and open to compromise".

The fee concession carries domestic risk. Many graduates are demanding changes to their own student loan repayments, and paying £450m a year to subsidise European students will be hard to sell alongside that.