MPs have accused the Government of “ignoring its own evidence” about new restrictions to student visas and downplaying the effect on colleges of lost income.

The Home Office’s impact assessment of the new regime, which was introduced this month, estimated that a worst-case scenario would mean an overall loss of pound;3.6 billion, comprising a loss of fee income as well as billions in lost output from students living and working in the UK.

But a report by the home affairs select committee said that the assessment had failed to take full account of the loss of income to colleges.

The amount received from non-EU students pursuing level 3 courses, who no longer qualify for visas, is currently about pound;42 million. EU students, whose travel is unrestricted, make up only about 20 per cent of overseas students.

At private colleges, the assessment assumed eight out of ten lost places would be filled by EU or British students, while in the publicly funded sector, it said that institutions might adapt by offering short courses, which would still be permitted under the new visa rules.

The committee said: “We question whether it will be as easy for institutions to fill student places and replace lost income as the Government’s impact assessment suggests.”

On top of the failings of the impact assessment, MPs said that the Government had not even referred to it in making the decision to change the immigration rules, since it was not available until 12 weeks after the policy announcement.

Keith Vaz, the committee’s Labour chairman, said: “The home secretary’s dismissal of the impact assessment is very disappointing. The Government appears to be not only making policy without adequate immigration statistics, but also ignoring its own evidence.

“We reiterate the need for an immigration policy which is both evidence- based and does not adversely affect the British economy.”

In a response to the committee’s report, immigration minister Damian Green noted that it had welcomed the Government’s decision not to impose a numerical cap on overseas student numbers, but said he needed to impose “tough measures” to deter bogus students.

Mr Green rejected the suggestion by the committee that it was “not persuaded that students are migrants” because they were only living in the UK for a fixed period and made a significant financial contribution to publicly funded colleges and universities.

“I agree with the report that not all students remain permanently but significant numbers do,” Mr Green said. In 2009, 13 per cent of migrants allowed to settle had originally come to the UK as students.

He added: “I am confident that our offer remains competitive when set against key alternative markets.”

Original headline: Ministers got it wrong on cost to colleges of visa changes, say MPs