Subsidies for EU students

The taxpayer faces a multi-million pound bill for subsidising top-up fees payable by EU students at universities in the UK, Liberal Democrats have warned.

There are about 10,000 undergraduates from elsewhere in the EU at universities in England and Wales and they are are entitled to the same financial support as domestic students.

Liberal Democrat education spokesman Phil Willis accused the Government of failing to make arrangements to collect fee debts once they returned to the Continent and said this could cost the taxpayer up to £90 million.

If Parliament passes the necessary legislation, upfront fees will be abolished in 2006 and replaced with a variable charge of up to £3,000 a year.

The Government will pay universities the fees in the first instance and then reclaim the money from graduates once they are earning more than £15,000 a year.

If EU student numbers remain constant and they all do three-year degrees, the Government will have to shell out up to £90 million for these students if all universities charge £3,000 a year, the Liberal Democrat analysis showed.

Research by respected economic think-tank the Institute for Fiscal Studies has indicated that the cost of subsidising the zero real terms interest rate of the fees loans could be as high as half the face value of the fee.

That meant the Government will have to subsidise EU students to the tune of £45 million but the real cost might be twice that if it fails to recover the debts from people scattered across Europe.

That process could prove complex, as fee debts will be reclaimed via the tax system, which suggests the Inland Revenue will have to reach agreements with its equivalents in the rest of the EU.

Mr Willis said: "Charles Clarke's desperate attempts to persuade the rebels in his own party seem to have left him with little time to think about the details of this Bill.

"The Government has completely ignored the consequences of their top-up fee Bill. Whilst EU students will have access to top-up fee loans, it beggars belief that no arrangements are in place to recover these debts."

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