UK willing to spend up to £450m a year on EU student fees, but only for access to Made in Europe scheme

British ministers are prepared to spend as much as £450 million a year to give European Union students discounted university fees. British officials say, however, that the concession will only be made if Brussels allows the United Kingdom access to its Made in Europe industrial programme.

Under the plans, students arriving from the continent would pay the same fees as British students. Sources say the government is willing to spend hundreds of millions of pounds compensating universities for the income they would lose.

British officials say the proposed industrial scheme will impose trade restrictions on countries outside the bloc. Access to the scheme is therefore treated as a major prize for the UK.

One person with knowledge of the talks said the UK is willing to give the Europeans what they want on fees, but will have to get something significant in return. The biggest prize being pushed for, the person said, is access to Made in Europe, so there is a deal to be done there.

A government spokesperson said the UK is building an ambitious, close relationship with the EU that will strengthen the economy, protect British industry, and create more opportunities for young people across the UK.

On Sunday, former chancellor Rachel Reeves praised Prime Minister Andy Burnham for thinking boldly about the UK's relationship with Europe, saying she believed Britain's future was within the EU. In her first major intervention since leaving the Treasury, she said those forging a path back towards EU membership had to make compelling arguments to the public.

Negotiators have been working for months on a series of deals to be finalised at a summit in Brussels on 20 November. Ministers hope an agreement there will unlock millions of pounds worth of benefits for British companies looking to do business in the EU.

Giving EU students cheaper access to British universities could nevertheless prove controversial domestically, especially when many British graduates are calling for changes to their own student loan repayment plans.

EU officials want their students to pay fees of just over £9,000 a year, rather than international fees, which can rise above £60,000. The demand briefly brought negotiations to a standstill this year, with British officials saying they had been blindsided by its inclusion in the talks.

Before the summit, agreement is understood to have largely been reached in areas including emissions trading, agricultural products and a youth mobility scheme. Reports suggest up to 80,000 young Europeans could be allowed to come to Britain to work, live and study, while EU member states had demanded between 100,000 and 150,000.

The two sides are also nearing agreement to allow Britain access to European biometric databases, which could help the UK government track asylum seekers. EU diplomats say top of the UK's list is Eurodac, a database that holds fingerprints of all asylum seekers from the age of six.

Two sources who have seen the costings said that under the most expensive scenario — reducing fees to the domestic level with very high demand — the government could end up paying £450 million a year. Another source said the true cost was likely to be lower, and a government official described the figure as speculative.

Mark Corver, an analyst of university funding and director at Campus Numerics, previously calculated that the policy would cost the sector £140 million in the first year and £400 million across the three-year period of a typical course.

France was the principal opponent of Britain's inclusion in the industrial scheme. France has since shifted its position with a proposal to allow British manufacturers into the system as long as the UK accepted dynamic alignment on EU tariffs. Business Secretary Jonathan Reynolds recently said he would not set tariff policy in response to pressure from Brussels.