The UK Government is considering spending as much as £450m a year to allow students from the European Union to pay the same university fees as British students, according to sources familiar with negotiations reported by The Guardian. The plan would require the government to compensate universities for the income lost through lower fees.

British negotiators are linking the proposal to access for UK companies to the EU’s planned Made in Europe industrial scheme. The programme is expected to restrict certain benefits to countries inside the bloc, while the UK is seeking guarantees that British businesses would receive equivalent treatment.

EU officials want students from member states to pay slightly more than £9,000 a year rather than international fees, which can exceed £60,000. The issue caused negotiations to stall earlier this year. Treasury officials have prepared estimates based on different fee reductions and levels of demand for British university places.

Two sources who have seen the calculations said the most expensive scenario, involving domestic-level fees and very high demand, could cost £450m annually. Another source said the final cost was likely to be lower, while a government official described the figure as speculative. Mark Corver, an analyst of university funding at Campus Numerics, previously estimated that the policy could cost universities £140m in its first year and £400m over a typical three-year course.

The discussions are part of a wider effort to strengthen UK-EU relations ahead of a summit scheduled for 20 November. Agreements are reportedly close in areas including emissions trading, agricultural products and a youth mobility scheme that could allow up to 80,000 young Europeans to live, work and study in Britain.

The two sides are also discussing British access to European biometric and security databases. The UK is seeking access to Eurodac, which contains the fingerprints of asylum seekers, and to the Schengen Information System II, which records information on fugitives, missing people and stolen goods. EU diplomats have warned that sharing some data with a non-member country could face opposition among member states.

Access to the Made in Europe scheme and the university-fee issue remain among the main unresolved matters. France has reportedly softened its opposition to British participation, proposing that UK manufacturers could be included if Britain dynamically aligned its trade measures with the EU. That condition could be difficult for the UK because its tariffs on Chinese electric vehicles are lower than those applied by the EU.

A government spokesperson said ministers were building an ambitious relationship with the EU that would strengthen the economy, protect British industry and create more opportunities for young people across the UK. Former chancellor Rachel Reeves has also argued that Britain’s economic interests, shared values and geography point towards Europe, while saying the government must demonstrate the practical benefits of closer ties.

Sources: The Guardian Education.