Written evidence by Newcastle University (HEF0046)

Education Committee

Higher Education and Funding: Threat of Insolvency and International Students

Executive Summary

Newcastle University welcomes the opportunity to contribute to the House of Commons Education Select Committee’s inquiry into higher education and funding. As a world-class civic university and anchor institution in the North East of England, we are committed to advancing the health, wealth and wellbeing of our region and beyond - supporting inclusive growth, skills development, and excellence in research and education.

Like many universities across the UK, we are navigating significant financial pressures arising from inflation, real-terms declines in domestic tuition income, and a reduction in international student enrolments. At this critical moment, proposed changes to Government policy - including the reduction of the Graduate Route Visa and 6% levy on international student tuition fees - risk further weakening the financial resilience of universities and undermining the UK’s global competitiveness in this space.

Key considerations in this submission include:

• The Graduate Route Visa has played a vital role in reversing a decade of stagnation in international enrolments, contributing more than £60 billion to the UK economy since 2021.[1] Its weakening risks contributing to job losses, course closures and declining financial sustainability across the sector.
• The Government’s proposed 6% levy on international student tuition fees would effectively act as a tax on one of the UK’s highest growth export sectors. Its introduction would risk reducing university investment in R&D, access and participation programmes, and course provision. Projections suggest 10 of 20 Russell Group universities in England would move into operating deficit if this levy were implemented.
• International students are not an optional supplement for UK universities - they are essential to the financial model of the UK higher education system. They underpin research activity, support domestic teaching, and enrich the diversity of our campuses and communities. They also deliver direct economic value - in 2021-22, international students contributed over £1.6 billion to the North East economy, while separate data has suggested that on average, every UK resident is £355 better off each year thanks to the economic impact of international students.[2]
• Universities like Newcastle are delivery partners in national renewal. Through a series of place-based partnerships and projects that are detailed throughout this submission, Newcastle University is working to enable the delivery of national missions across opportunities, health, reindustrialisation and devolution.
• A joined-up, long-term policy approach for higher education across the UK is essential. The Government must recognise the critical role of higher education institutions, and ensure that immigration and higher education policy supports, rather than undermines them. What the higher education sector needs above all is policy stability, and doing so would enable the Government to boost innovation-backed growth, reduce migration to the UK and help restore public trust.

Impact of Government Policy on International Students

How will current Government policies affect the financial stability of higher education institutions?

The UK higher education sector is facing acute financial challenges. These challenges, arising from instability in international student recruitment and rising costs due to inflation are placing financial pressures on higher education institutions across the country.

Newcastle University, in common with other universities across the country, is not immune to these challenges. Whilst we are in a stronger position than many other universities, as an organisation we have been carefully reviewing both pay and non-pay budgets to safeguard our long-term financial stability and resilience. We have also launched a five-year transformation programme that will review our structures and processes to ensure that they are fit for purpose and efficient, simplifying administrative processes and reducing costs.

It is, however, against this challenging backdrop that the higher education sector is facing reforms that will impact a key contribution to financial resilience - international student admissions. At Newcastle University, we are deeply concerned about the potential impact of the Government’s proposed reforms. If implemented at this critical juncture, these changes risk making the financial position of universities across the UK even more precarious than it already is.

At Newcastle University we see firsthand the critical contribution international students make to the financial resilience of UK universities. Their impact helps cross-subsidise high-quality teaching and wider participation and enables research activities that are otherwise underfunded through public sources. However, current Government policies - particularly the reduction of the Graduate visa from 24 to 18 months, the potential introduction of a levy on international student tuition fee income and inconsistent messaging vis-à-vis immigration - risk damaging the UK’s international reputation and weakening a vital revenue stream for already stretched higher education institutions. Retaining these students following completion of their studies helps the UK to attract R&D and financial investment.

Graduate Visas

The success of the Graduate Route Visa has been clear. It helped reverse a decade of stagnation in international student numbers, contributing more than £60bn to the UK economy since 2021.[3] In the North East alone, international students contributed over £1.6bn to the regional economy in 2021-22. Data also demonstrates the significant tax contribution that students on the Graduate Route Visa make, with the benefits to the UK in higher tax revenues estimated to have been £588 million in 2022-23. This economic impact sits alongside huge social, cultural and soft power benefits from attracting global talent into UK higher education institutions and regional economies.

Following changes to visa policy under the previous Government, the number of visas issued to international students and their dependents significantly declined. Sadly, we are now seeing the tangible impact that this is having on universities across the country. Ultimately these changes are among the several reasons why we now have a higher education sector that is in urgent need of financial support.

We understand the challenging fiscal environment in which the Government is operating in, and we know that we cannot rely on additional public funding in the immediate term. International student fee income however helps fund institutions that understandably cannot rely on increased levels of public funding at this time due to fiscal constraints. As a result, the decline in numbers of international students choosing to study in the UK poses a significant threat to the long-term financial sustainability of universities such as Newcastle.

International Student Levy

The proposed 6% levy on international student tuition fees, as set out in the recent Immigration White Paper, is also of particular concern. This measure would amount to a tax on one of the UK’s highest growth exports, undermining universities’ ability to deliver on the Government’s core missions - from economic growth and widening opportunity to major initiatives such as the Industrial Strategy and the NHS 10-Year Plan. While we recognise the Government’s manifesto commitment to reduce levels of immigration and to root out the abuse of visas, it is worth emphasising that Russell Group universities such as Newcastle already have extremely high compliance rates. We are committed to working with the broader sector to stamp out misuse of visas.

A wider challenge is the reality that the international student market is extremely price-sensitive and highly competitive, and universities cannot simply raise fees to absorb the cost of the levy. A levy of this kind would therefore make the UK less attractive as a destination for global talent. The risk is that institutions would be forced to divert funds away from areas of strategic importance. In fact, projections suggest 10 of the 20 Russell Group universities in England would be pushed into an operating deficit by this levy. Whilst the Government has suggested that funds raised through the levy could be reinvested in skills, this overlooks the significant existing investments universities like Newcastle are already making in skills provision. There is also no clear mechanism to ensure the revenue generated by the levy would be transparently or efficiently returned to the sector.

Analysis from Public First has suggested that on average, every UK resident is £355 better off each year thanks to the economic impact of international students.[4] The figure rises to £466, on average, for every UK resident working adult (on a full-time equivalent basis).[5] At a time of fiscal constraint, this contribution should be safeguarded, not undermined. We therefore strongly urge the Government to reconsider its proposal and work with the sector to support international student growth, not penalise it.

Role of Higher Education institutions

Universities are engines of economic growth and productivity and support public services locally and nationally. They are often one of the largest local employers and are powerful economic actors - as one of the UK’s largest export sectors and as large-scale purchasers and attractors of inward investment. The Government’s own analysis shows that total UK revenue from education related exports was estimated to be £25.5 billion in 2021, which represents a 72.23% increase in current prices since 2010.[6]

There is no doubt that the higher education sector must adapt to the changing times and global headwinds. But short-sighted policy choices - particularly those that undermine universities’ ability to diversify income - reduce our capacity to invest in quality education, widen participation and contribute to the public good as well as the Government’s missions for national renewal.

What the higher education sector needs above all is policy stability and an immigration policy which is joined-up, cross-government, long-term, and transparent - doing so would enable the Government to boost innovation-backed growth, reduce migration to the UK and help restore public trust.

There has been some recognition from Government of the need to strengthen the UK’s competitive position. The Global Talent Fund, launched in June 2025, is a welcome step. But limiting the Fund’s access to a handful of institutions risks reinforcing structural inequity within the sector. Universities like Newcastle - with international research strengths, civic commitment, and proven delivery capability - must be part of this agenda.

What implications will these policies have on future tuition fee increases?

In the absence of a significant uplift in domestic undergraduate tuition fees - which have remained effectively frozen in real terms since 2012 - universities have sought to manage costs while leveraging international fee income to maintain excellence.

However, increased restrictions or costs on international student enrolment reduce universities’ ability to absorb shortfalls, reinvest in the student experience and actively contribute to the growth of the UK economy. In this environment, pressures to increase fees may grow - but for many providers, this is not practically feasible.

As mentioned in the answer to the previous question, the proposed 6% levy on international tuition fees would act as a tax on one of the UK’s most successful exports. Far from solving the problem, it would exacerbate pressures including potentially leading to unintended consequences such as:

•                   Reducing R&D activity, with implications for the growth and skills agenda. Universities currently invest more than £6bn annually of their own resources - largely from international student fees - into high-quality research and PhD training;
•                   Scaling back access and widening participation programmes. Over £250m is invested annually by Russell Group universities into participation programmes. This investment has supported a 56% increase in disadvantaged student enrolment since 2019;
•                   Further staff reductions and fewer course options, directly affecting the student experience and the UK’s global educational offer.

For institutions already operating on thin margins, these pressures would further put into question long-term sustainability and impact the UK’s global standing. 

How will the interaction between international student enrolment and tuition fees shape the sector’s financial outlook?

As detailed already, international students are not an optional supplement; they are core to the financial model of UK higher education. At Newcastle, international fee income helps sustain research in areas directly aligned to national and global challenges: clean energy and electrification, health and ageing, digital technologies, advanced manufacturing, and place-based economic renewal.

Without a stable and supportive environment for international enrolment, universities will face increasingly difficult trade-offs. Universities like Newcastle are taking responsible steps to secure their financial future, but the cumulative impact of tightening international policy and static domestic funding presents risks. As mentioned, at Newcastle University, we have implemented cost-saving measures in response to reduced international recruitment and rising operating costs.

While our actions are designed to preserve our academic excellence and safeguard our role as an anchor institution in the North East of England, we remain concerned that a long-term decline in international enrolments - whether driven by visa changes or levies - will accelerate retrenchment across the sector.

There will also be a reputational risk to the UK’s standing as a welcoming destination for global talent. International students do not just provide financial value - they enrich our communities, enhance the learning experience for all, and strengthen the UK’s global connections.

The Government is well positioned to adopt a joined-up approach to education policy - one that recognises the value of these students to the economy, to regional growth, and to the UK’s soft power.

Ramifications of Institutional Insolvency & Regional Impact

How do higher education institutions contribute to growth in their local economies, the provision of public services, and their wider communities?

Universities are powerful civic institutions, deeply embedded in the social and economic fabric of the places they serve. At Newcastle University, our mission is to advance the health, wealth and wellbeing of our region and beyond. As one of the world’s top 140 research-intensive universities, we exist to benefit society through our leading-edge research and education - locally and globally. As the Education Secretary has recently made clear, universities are expected to play a greater civic role in our communities, including better outcomes for disadvantaged students, strengthening our contribution to economic growth and improving teaching for students. 

Newcastle University is an anchor institution in the North East of England and one of the region’s largest employers. Our contribution is multifaceted - as a partner in economic development, a convener of communities, and a driver of long-term regeneration. From clean growth and digital infrastructure to health innovation and culture, we are a cornerstone of regional resilience. In November last year, we also announced a new collaboration with Durham, Northumbria, Sunderland and Teesside Universities under the banner of Universities for North East England, or UNEE. Through UNEE, all five of the region’s universities are working together to support innovation and business and position the North East for investment.

The recent introduction of the English Devolution and Community Empowerment Bill reaffirms the Government’s commitment to rebalancing power away from central government so that local leaders can take back control and improve prosperity for local people. As part of Insights North East, a regional partnership, we were able to support the North East Combined Authority’s (NECA) evidence base for its Interim Local Growth Plan - setting out the Authority’s five missions to support the North East’s potential for growth, which is critical for both the region and the country as a whole.

Working closely with NECA, we are contributing directly to the development and delivery of their organisational missions. Through our research, we are driving the innovation that will underpin the future economy, and through our education we are making sure that people are equipped with the skills they need to succeed in the workforce of the future in key growth sectors such as the creative industries, offshore wind and energy transition, advanced manufacturing, digital and AI, life sciences and the visitor economy.

Advanced manufacturing and clean energy are set to be key growth-driving sectors for the region as the home of the green energy revolution.

• We are the higher education partner in MADE NE (Manufacturing, Automation, Digitalisation, Electrification North East). Supported by NECA and led by Nissan on behalf of the region’s automotive sector, MADE NE will create world leading training facilities over two sites in Sunderland, with a particular focus on EV and battery manufacturing.
• With New College Durham and industry, we are leading the National Battery Training and Skills Academy to train the next generation of workers in battery technology.
• In collaboration with Northumberland County Council, the Offshore Renewable Energy Catapult (OREC), Durham University and energy businesses, we will be involved in developing energy sector expertise up to PhD level as part of a new Energy Central Institute in Blyth, South Northumberland. NECA has pledged almost £5.5 million to support the creation of this higher-level skills and innovation facility, due for completion in 2027, aimed at securing the region’s position at the forefront of energy sector growth.
• We are also supporting the North East Investment Zone and developing global opportunities for trade and investment, aligned with our campuses in Singapore and Malaysia, through the Johor- Singapore Special Economic Zone.

Recent figures have also revealed the critical role that university graduates play in driving growth across the North East of England, including by starting their own businesses. A Universities UK (UUK) analysis of Higher Education Statistics Agency (HESA) data found that across the region, more than 1,100 new companies were created by staff and graduates of the North East’s five universities, including Newcastle, between 2014 and 2023, generating more than 4,000 jobs in 2022-23.[7]

• Our hugely successful START UP scheme, run by the University’s Careers Service, supports graduate entrepreneurs, offering advice on grant funding, networking, coaching and connections across the North East start-up community.
• For established businesses, our Arrow programme provides support for local SMEs to develop and innovate new products and processes. Over the past five years, Arrow has supported over 200 North East-based businesses with tailored solutions to a diverse range of business challenges. An independent assessment forecasted that the businesses who had undertaken Arrow projects would collectively create 143 new jobs and increase their turnover of £16.9 million.
• Northern Accelerator, an innovative collaboration between Newcastle, Durham, Northumbria, Sunderland, Teesside and York Universities, is transforming research commercialisation and helping academics and leaders with end-to-end support for spin-out companies.

Our cutting-edge research and innovation in ageing and health not only benefits our city and region, but also countless other communities around the world.

• Work is now underway on our pioneering Health Innovation Neighbourhood (HIN). Working with partners, we are transforming the former General Hospital site in Newcastle’s West End, building on world-class research and innovation focused on ageing and living well. HIN aims to combine health, research, and community amenities and support local economic and infrastructure development.
• Led by Newcastle University, HIN’s overall vision is to be an exemplar in promoting new ways of living that lengthen people’s health span as well as life span. The project will include 350,000 square feet of research and innovation facilities, a further 350,000 square feet of business, employment and education space, 100,000 square feet of NHS and other health-related facilities, and 1,250 new homes, up to 15% of which will be affordable housing.
• This is real, place-based healthcare transformation - tackling health inequalities in a way that’s directly aligned with the Government’s 10 Year NHS Plan.

Through our cultural partnerships and creative practice, we are further enriching the North East and bringing positive impact to peoples' lives.

• Run in collaboration with our partners, Tyne and Wear Archives and Museums (TWAM), our Great North Museum: Hancock (GNM) and the Hatton Gallery are two of the North East’s most popular visitor attractions. Research England recently confirmed increased funding of more than £300k annually for the next five years supporting our work with the GNM and Hatton.
• Our newest cultural venue, the Farrell Centre, was established with a mission to create a home in Newcastle where everyone can take part in a conversation about the role of architecture and planning in shaping the city’s future.
• Through our role as lead partner for the Creative Industries Policy and Evidence Centre, co-hosted with the Royal Society of Arts (RSA), and our connections with the Northern Creative Corridor - we chart a course towards a richer future enhanced by culture and creative arts.

The North East of England traditionally has some of the lowest levels of educational attainment and progression rates to higher education in the country. Over 40% of our UK students are now drawn from under-represented groups. Many of them applying for study via regional and national initiatives we lead on, all of which are designed to break down barriers to opportunity.

         Our flagship widening participation programme, PARTNERS, has grown from a cohort of local schools in 2000 to a nationwide scheme attracting 4,000 applications for entry in 2025. It provides additional support with applications, a lower contextual offer of study and a subject-specific summer school, designed to raise students’ confidence in their ability to succeed at our University.

         Through the North East Uni Connect Programme we are removing academic, financial and cultural barriers, ensuring all young people, along with their parents, carers and teachers, have the information and support they need to achieve their ambitions.

         We also lead Realising Opportunities, an award-winning national fair access scheme which encourages talented students to apply to leading institutions.

         The North East Raising Aspiration Partnership (NERAP) is a long-standing collaboration of the five universities in the region who fund and collaborate on outreach activity for under-16s. At the beginning of 2023, NERAP became the first regional Higher Education partnership to collaboratively sign up to the Care Leaver Covenant, committing us to providing all care-experienced students with consistent access to support throughout their university journey.

         We partner with Northumbria University to deliver IntoUniversity Newcastle East, a local learning centre that helps raise attainment among young people from disadvantaged neighbourhoods, providing sessions of structured academic study after school for 7- to 18-year-olds, where progression to higher education among participants stands at 74%, compared to the local average of 12%, and a national average progression of 44%

Following completion of their studies, our students contribute to local growth and provide vital services for the communities in which they live and work. Between 2021 and 2026, the five universities comprising UNEE will train around 11,000 nurses, 4,000 doctors and 8,000 teachers, many of whom will stay in the region and support its healthcare and education systems. Recent analysis from Universities UK estimates that by age 30, graduates in the North East of England earn a third more (34%) than non-graduates who could have gone to University, further supporting the prosperity of the region.[8]

All these initiatives and contributions are not abstract. They are tangible, measurable, and place specific. Universities like Newcastle are not passive actors in their regions - we are delivery partners in the UK’s drive for economic growth and increasing opportunity for all. But to maximise this contribution, we must be embedded in Government policy from the outset - not as an afterthought, but as core infrastructure for regional and national growth. We are ready to play this role. With the right policy environment, universities including Newcastle can help the UK meet its challenges and achieve its national ambitions.

September 2025