Tourism, education and health-related travel services

UK trade in tourism, education and health-related travel services

241.Of the sectors covered by this inquiry, only trade in travel services falls under WTO (GATS) mode 2 (‘consumption abroad’), whereby a consumer of services travels to the location of the service provider. While a traveller is defined as a person staying for less than one year in an economy where they are not a resident, trade statistics also include students and medical patients, however short their stay, because they remain formally residents of their country of origin.339

242.In this chapter, we consider the UK’s trade in travel services, encompassing tourism (or personal travel), education and health-related travel services. We recognise that there are wider issues for these sectors in the context of Brexit, and our comments do not reflect on the relative importance of these services to the UK domestic economy. Nor do we discuss the need to travel for business purposes (to provide or consume a service), which is covered in previous chapters.
Personal travel

243.Personal travel services include recreational holidays and the money spent in the local economy by visitors. Overseas tourism in the UK is treated as ‘exports’, while UK tourism abroad is treated as ‘imports’. Globally, trade in personal travel services accounts for 83% of all travel services imports and 55% of the UK’s exports340. The ONS’ written evidence to this inquiry showed that the UK runs a deficit of £11.5 billion in tourism services with the EU. This deficit is so large it outweighs the UK’s surplus of trade in most other services sectors (valued at £9.8 billion).341

Education-related travel

244.Exports in education-related travel services are measured according to the tuition fees and other expenditure of students who are funded from abroad while studying in the UK. Likewise, imports relate to the expenditure of UK students studying abroad.342 EU-funded R&D projects are not treated as traded education-related services, and are beyond the scope of this inquiry.

245.The UK is a world leader in education services. In 2014/15 there were 312,010 students from outside the EU enrolled at a UK university, and a further 124,575 students from EU countries. In total, 10.3% of the world’s mobile students studied in the UK, second only to the US.343
Health-related travel

246.Although accounting for a small percentage of the volume of services trade, trade in health-related travel services refers to the cost of medical and other expenses of those travelling abroad receiving medical treatment.

247.The NHS Confederation told us that “the principle of the free movement of services applies also to health services”. This was not only because “health service providers can offer their services in the other EU Member States”, but, more frequently, because patients can also receive health services abroad.344 Examples include the short-term provision of emergency health services (through the use of the European Health Insurance Card), and the provision of longer-term care (for example, care for retirees in Spain, the costs of which are reimbursed through legislation between Member States). Trade in health services also includes elective treatment where a citizen of one Member State “goes to another to receive care on a voluntary basis”.345

Priorities for a UK-EU FTA

Frictionless travel for EU tourists to the UK

248.Kurt Janson, Director of the Tourism Alliance, explained: “Anything that makes the consumer experience in coming to the UK more costly and more hassle will mean they will simply go somewhere else.”346

249.Mr Janson gave the example of the “soft check at the border” for EU nationals, which meant that “90% of people will be serviced within 25 minutes”. If there were to be “hard checks for EU nationals”, in contrast, about “90% of people” would be “serviced within 45 minutes … standing in a queue for 45 minutes is not going to encourage you to come here”. He quoted research which found that, “if you increased the cost of coming here by just 1% for overseas visitors, the revenue that the UK gets from overseas visitors will decrease by 1.3%”.347 EU students and international fees

250.Universities UK told us that EU students currently made up 5.5% of the UK higher education student population but as much as 25% of the student population at some universities. Demand from EU students supported the “provision of certain subjects, without which, specific courses might not be financially viable for home students alone to study”. They noted that “of all postgraduate engineering and technology students, 13% are other EU nationals, as are 16% of mathematical science postgraduate students”. They also noted that non-UK EU students paid fees of £600 million in 2014/15—accounting for as much as 8% of all income for universities.348 Professor Sir Ian Diamond, Principal and Vice-Chancellor of the University of Aberdeen, told us that spending by EU students in the wider UK economy accounted for £3.7 billion, and supported over 34,000 jobs.349

251.Universities UK observed that the “principle of non-discrimination” ensured that EU students were “eligible to pay the same tuition fees as UK students”, and were “able to access financial support in the form of grants and loans”. They supported the continuation of these arrangements after the UK leaves the EU.350

252.The University of the Arts London noted that EU students paid no tuition fees in Germany, Austria, Denmark, Finland and Greece. They suggested that increasing tuition fees for EU students in the UK post-Brexit would result in a “notable business risk”, putting UK universities “at a market disadvantage to our EU competitors”. There was “no other industrial sector in which the Government would aim to reduce customer flows and inward investment”.351

Provisions on health services

253.The NHS Confederation noted that existing EU trade deals included “stringent safeguards”, to ensure governments continued to have the right to legislate on public health measures. It was important that any future UK-EU FTA included measures enabling the UK “to maintain high standards of protection for public health services and not to agree lower standards”.352 Witnesses also wanted the process of recruiting health services staff from the EU to “be as simple and as straightforward as possible”353 after Brexit.
Reciprocal access to health care services

254.The NHS Confederation were concerned that, post-Brexit, “British citizens on holiday in Europe might no longer be able to use the European Health Insurance Card”, thereby limiting their access to cross-border healthcare. Conversely, “EU tourists [in the UK] would no longer be entitled to receive NHS care following Brexit”. They called on the Government to “ensure that a fair alternative system is put in place, either with the EU as a whole or with those EU countries, such as Spain, which have high numbers of UK nationals living there”. Special regard should also be given to Northern Ireland, “which has a long tradition of collaboration with the Republic of Ireland in the provision of health services across borders”.354

Trading under WTO rules

255.Failure to agree a UK-EU FTA would result in UK-EU trade in tourism, education and health-related travel services being conducted on the basis of WTO rules.
Personal travel

256.Approximately 125 member countries have made commitments under the GATS for tourism and travel-related services, including the EU Member States under a shared schedule. This schedule covers market access and national treatment conditions for:

Hotels, restaurants and catering services;

Travel agents and tour operators; and Tourist guide services.

257.The EU’s schedule lists few restrictions in the areas covered. Nonetheless, the Tourism Alliance said leaving the EU without bespoke measures in place to facilitate the movement of EU visitors would “have a very considerable detrimental impact on the UK tourism industry”. While they could not put an exact figure on this impact, they believed that “just a 10% increase in costs would reduce tourism revenue from Europe by £1.3bn per annum and cost 24,000 jobs”.356

Health and education-related travel

258.Trading under WTO rules would not automatically facilitate continued trade in education and health services between the UK and the EU after Brexit. The GATS includes a blanket exemption for those services “supplied in the exercise of governmental authority”, whereby services are supplied “neither on a commercial basis, nor in competition with one or more service providers”.357

259.Witnesses generally welcomed this exemption, and were concerned that policy decisions might result in these types of services falling within the scope of the GATS in future.

260.The University and College Union was concerned that proposals to liberalise trade within the GATS could lead to education being included within trade agreements, posing “a threat to public interest regulations governing education”. This was particularly troubling, given the Government’s plans to “encourage a more market-based approach to higher education and make it easier for new providers to enter the sector”.358

261.The NHS Confederation said the interpretation of the GATS exemption for publicly provided services was “controversial”, because “the opening of health services to competition in England makes it difficult to argue that the services commissioned on behalf of the NHS are not supplied in competition with other providers”. The practice of contracting out NHS services also meant it was “debatable whether these are supplied in the exercise of governmental authority”.359

Conclusions

262.Of the categories of services under consideration in this inquiry, travel is the only one in which the UK has a large trade deficit with the EU. This is attributable to the fact that many more UK citizens travel to the EU for business and recreational purposes than the reverse. It follows that UK tourism is economically very important to some EU Member States, as well as being socially important to the UK.

263.EU students travelling to the UK to study make a significant contribution to the UK economy, both by means of fees and by injecting money into towns and cities across the UK. These fees help universities to cross-subsidise courses that may not otherwise be viable. The Government should bear in mind the possible negative effect of increasing fees for EU students on trade in education services after Brexit. We note that determining the status of EU students going forward will form part of the Government’s development of a new immigration policy in coming months.

264.Without provisions in a FTA, trade in education and health-related travel services between the UK and the EU will be restricted after Brexit. This is largely because publicly provided services are excluded from the GATS at the WTO—although this issue is the subject of ongoing debate.

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