Ministers should remove international students from the Government's targets on migration, or risk damaging the quality and competitiveness of British universities and harming the UK's influence around the globe, a parliamentary report warns.
The UK is currently the second most popular destination for international students, after the USA, but recent data suggests numbers will fall because of new measures to tighten up on student visas, said the report by the House of Lords EU Committee.
The higher education sector argues that including foreign students in official migration figures makes them an easy target as the Government seeks to meet its goal of cutting net immigration from outside the EU to below 100,000 a year.
And the report said that the Government's approach was creating the perception overseas that foreign students are "not welcome in the United Kingdom".
Home Secretary Theresa May last week announced the introduction of face-to-face interviews for 100,000 applicants for student visas a year. She trumpeted the Government's success in closing down bogus colleges and cutting student visa numbers by 74,000 (26%) last year as part of a drive to reduce overall net migration.
She insisted that there was no cap on legitimate students from outside the EU, and said that numbers at universities had actually risen during the clampdown on bogus colleges. But the report pointed to data from recent Universities UK surveys which suggest there have already been "significant" reductions in student visa applications from India and Pakistan and predicted "negative future trends" in numbers.
It cited university concerns that, so long as students are counted within the immigration figures, the overall reduction in net migration sought by the Government cannot be achieved without "considerable cuts to the numbers of legitimate international students coming to the UK".
The cross-party committee warned that the current policy "harms both the quality of the UK's higher education sector and its ability to compete in an increasingly competitive global market for international students, particularly with other English-speaking countries and some EU member states, thus reducing much-needed income from tuition fees for our universities and damaging the United Kingdom's international influence in the longer term."
The report also warned that, as the UK and other European countries face ageing populations and a declining birth rate, legal third country immigration into the EU will be "needed to keep the economy on track and retain Europe's competitiveness in a global market".
"There is no cap on the number of legitimate students who can come to the UK," said Immigration Minister Mark Harper. "But we have to stamp out the abuse we saw in the past and our latest statistics show that our policies are beginning to bite - the overall number of student visas issued is down, but the number of students applying to come to our world-class universities is up."