Modern politicians like to demonstrate their effectiveness through high-profile displays of machismo. It is important to be tough on those in need of discipline. In the past few weeks, we have seen the education secretary Michael Gove defend the "marking down" of GCSE exams, and the former immigration minister Damian Green come down hard on London Metropolitan University.

Such stiff justice allows politicians, especially those of the right such as Gove and Green, to prove their political manhood as they stand up for Britain. Talk of strictly enforcing a firm penal code can swell your following in the Daily Mail and The Daily Telegraph. However, as Gove soon discovered, elsewhere it can quickly result in dysfunction at the polls, as voters on the receiving end are turned off rather than aroused by such manly posturing. There is a thin line between les droits du seigneur and cruelty. The response to events at London Met shows that immigration and education is not a black-and-white issue; in reality it has fifty shades of grey - or, until last week's reshuffle, Green.

With the exceptions of Oxford and Cambridge, London Met is the most politically significant university in the country. With more than 26,000 students, it is larger than the universities of Edinburgh, Glasgow, Bristol or King's College London. It is famously said to have more black students than the whole of the Russell Group combined and can boast among its alumni Charlie Whelan, Peter Tatchell, Kate Hoey, Neil Tennant, Vic Reeves and Otumfuo Nana Osei Tutu II, King of the Ashanti. Its graduate centre on Holloway Road was designed by the architect Daniel Libeskind. It regularly props up league tables in newspapers, and since 2009, when the Higher Education Funding Council for England decided to fine London Met ?35 million for systematic misreporting of undergraduate numbers, has become a byword in the sector for "characterful" administration and experimental managerial practices. London Met is the poster boy for those universities that Gove called, in an infamous 2003 article for The Times, "Lada plants" and is, for this reason, the site where coalition ideology on higher education is being most keenly played out. It must be uncomfortable for the staff and students of London Met to be treated like the proverbial political football, with all the kicking and headbutting that this metaphor implies. So how did it ever come to this?

Before the UK Border Agency decided to revoke the university's highly trusted status, London Met's reputation preceded it. The 2008 student number controversy led to the chief executive of Hefce calling for the resignation of the entire board of governors following the departure of the vice-chancellor, Brian Roper. Malcolm Gillies, who had resigned as vice-chancellor of City University London following disagreements with his own board, took over as vice-chancellor of London Met in January 2010. After the seismic shifts created by austerity, the Browne report, and the Department for Business, Innovation and Skills' ad hoc responses to it, Gillies announced a course review that would reduce the number of degrees on offer from 557 to 160. This year, the university issued a tender reputedly worth ?75 million for an outside company to take over the running of all university activities except teaching and the work of the vice-chancellor himself. All this has taken place against a background of unease in industrial relations at London Met, Hefce fines for over-recruitment in 2011 and the awaited outcome of the university's Affordable Quality Education strategy, having set the lowest average undergraduate fee in the country at ?6,850.

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Having been such eager early adopters of the "paradigm shift" in higher education envisioned by David Willetts, perhaps the management at London Met did not imagine they would be treated so harshly by another branch of the coalition government over the shortcomings in their visa record-keeping. Other universities have temporarily had their highly trusted status suspended, before quickly returning to compliance with immigration rules that - as Edward Acton, vice-chancellor of the University of East Anglia, put it in a Newsnight debate with Green - "are monitored with a precision that Stalin would have enjoyed".

Since their initial visit six months ago, London Met executive officers (one of whom is Jonathan Woodhead, a former special adviser to Willetts) would appear to have taken a relaxed attitude to the return of the UKBA auditors. Perhaps they imagined that the outsourcing of administration would solve all their problems. However, they had not reckoned on the diremption between the Conservatives' admiration for free-market economics and their equal love of protectionist approaches to closed borders. Such inchoate policymaking has been made worse by the increasing tensions between the coalition partners and accordingly between BIS and the É«ºÐÖ±²¥ Office.

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Cable & Willetts^TM have been arguing within Whitehall for the removal of international students from the net migration statistics. The revocation of London Met's highly trusted status shows that this debate has been decisively lost. The É«ºÐÖ±²¥ Office announced the withdrawal of London Met's licence on the same day as the latest set of immigration figures were published, which showed that while student visas were down nearly a third on the previous year, Theresa May and her team were a long way off delivering on David Cameron's election pledge to reduce net immigration to "tens of thousands". The cynical might read something into the media furore currently surrounding London Met as yet another distraction from what has come to be known as "omnishambles" government.

The results of the É«ºÐÖ±²¥ Office decision will no doubt be: continued damage to the reputation of UK higher education (one of Britain's few successful export industries along with the arms trade and Premiership football); the further marginalisation of Cable & Willetts(TM) over education policy; the immediate hardship presented to some 2,700 international students at London Met who now must find another course and sponsor or face deportation within 60 days of receiving "curtailment letters"; and the dire financial impact on an institution that lists the funding council as its biggest creditor.

In 2010-11, overseas fees accounted for at least 15 per cent of London Met's ?157 million income. With the introduction of the new undergraduate fees regime this September, one suspects that the financial situation at London Met is becoming ever more precarious. Gillies could not "rule out the possibility of closure" in an interview he gave on Radio 4 when the news broke. While universities are resilient entities, there would seem to be little chance of Hefce recovering its debts in the immediate future: one way or another, the É«ºÐÖ±²¥ Office decision will result in the taxpayer bailing out London Met for a while yet. However, it is not unforeseeable that in the new climate of self-sufficiency announced by last year's higher education White Paper, London Met could become the first institutional failure of this brave new world. If no other higher education institution is willing to help London Met merge its way out of its difficulties, as the higher education analyst Andrew McGettigan points out, London Metropolitan is a company limited by guarantee, and no primary legislation or government approval would be needed for a private buyout.

It is believed that such a scenario for one of the London post-1992s has been a long-term ambition of the policy wonks at BIS. The purchase of the charitable College of Law and its degree-awarding powers by a private equity firm in April of this year provided a precedent for such a possibility. In this context, the highly cynical would read something into the continued evisceration of London Met if it were not for the fact that the senior management there seem only too willing to pursue the course of privatisation unprompted, and the difficulty anyone would have in imagining the various ministries of the coalition government capable of joint, concerted action.

Conspiracy or cock-up, the staff and students of London Met find themselves between Willetts' rock and the É«ºÐÖ±²¥ Office's hard place. The sector has - almost - unanimously rallied round, condemning the decision as disproportionate just as they have helpfully begun to pick over the bones of their competitor. Other vice-chancellors well know that there but for the grace of the UKBA go they: but that was always the point of the É«ºÐÖ±²¥ Office's decision to discipline London Met. All across British academia, one can hear the sound of whalebone visa-compliance being tightened. It is not possible to say that this situation was unforeseeable: Glasgow Caledonian and Teesside universities have sailed close to the wind already.

Hefce was unusually quick to announce the formation of a "task force" (with BIS, UKBA and the National Union of Students) to help the unfortunate London Met students. However, even the wheels of emergency bureaucracy grind slowly and the task force was not able to establish a clearing house for students until 17 September. In the meantime, students have already approached other enterprising institutions including, ironically, the new London campus of Glasgow Caledonian. The Hefce task force represents an unprecedented intervention into a British higher education institution, raising serious questions about the autonomy of universities and the extent to which London Met's biggest threat comes from the possibility of privatisation or from interventionist government. Gillies and his board of governors have decided to face down the UKBA through judicial review, their case strengthened by the Public Accounts Committee, which simultaneously released an unrelated and highly critical report on the many failings of the student visa system, and by a new report from the BIS select committee calling on the government to record overseas students under a classification that does not count against the overall limit on net migration. A showdown between the sector and the government over immigration has been a long time coming and it is a fight that neither side can afford to lose.

The BIS White Paper promised to put students at the heart of the system. However, when faced with the base instincts of what the present É«ºÐÖ±²¥ Secretary once referred to as "the nasty party", Willetts (officially on holiday when all this took place) has proven to be something of a fluffer.

The real victims in this imbroglio are the thousands of legitimate students facing disruption to their studies and the staff who may face redundancy to pay for it. While the sector-wide consensus has been refreshing (perhaps a unique occurrence since the formation of the coalition), it raises a further question. Now that the É«ºÐÖ±²¥ Office has taken such strictures against a university, is Universities UK willing to back the judicial review and see this battle through to the end? It knows the damage that this draconian immigration policy is having on "the industry", the economy and the lives of real people. It has been lobbying against it, unsuccessfully, for some time. But are its members now willing to roll up their sleeves and volubly make the case for higher education: to take on and defeat the column writers of the Mail and the Daily Express, the ideologues of the Tory party and all the other stokers of the disproportionate, macho discourse on immigration in this country (one being London Met's own "blue Labour" Maurice Glasman)?

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Universities have hitherto wanted to pick and choose the parts of coalition higher education policy that they liked and disliked. The case of London Met demonstrates that being so selective might not be that easy because the histories of all these policies are conjoined in the same paradigm shift to education as a right of citizens to a traded service. Taking a stand against inhospitality to international students also logically requires us to insist that the borders of our universities be open for everyone. That would be the true meaning of London Met, and would reaffirm the role of higher education in the formation of British public life and its contribution to the development of international culture. London Metropolitan University has always been politically significant but, in the past few weeks, the stakes just got higher.

Martin McQuillan is dean of arts and social sciences at Kingston University.