Thousands of extra places could be created in British universities over the next five years, Education and Employment Secretary David Blunkett indicated this week.
He told members of the Commons select committee on education and employment that the cap on student numbers would be eased off to increase opportunities for young people.
At present about 30 per cent of young people go on to higher education, but Mr Blunkett said that could rise to 35 per cent by 2002.
He rejected claims that charging university tuition fees and abolishing grants from next year would deter entrants to higher education. But he admitted that officials had not researched the effect of the Government's scheme before it was announced, hours after Sir Ron Dearing published the result of his 18-month review of higher education in July.
Mr Blunkett acknowledged that the policy could have been better presented and promised a publicity campaign to persuade young people that they can afford the new student loans, which could mean running up a debt of around Pounds 10,000 by the end of a three-year degree.
But he insisted that the Pounds 165 million grant to universities announced earlier this week would stave off cuts and provide extra cash for hardship funds, despite a fierce attack from leading economist Nick Barr, who claimed Pounds 95m of the extra grant would be swallowed up by inflation.
Dr Barr said: "The Pounds 165m stops the system deteriorating further but the is very little in it that will actually improve quality."
But Mr Blunkett, who was being questioned a day after announcing the Pounds 165m cash injection for universities, funded by fees and an internal review of Government spending, argued that some of Dr Barr's calculations were "fundamentally wrong".
The Government's announcement, timed to deflect criticism of fees at Labour's party conference, provides slightly more than the minimum vice-chancellors said would be necessary to prevent serious damage to universities. Vice-chancellors welcomed the announcement but warned there was still an urgent need for further investment. Lecturers also gave it a cautious welcome. Both the Association of University Teachers and NATFHE warned more cash was needed.
Mr Blunkett's package includes Pounds 10m for promoting teacher training, although ministers have yet to decide how the money will be spent.
There was a widespread welcome for the Pounds 36m allocated to access funding in response to pressure from Sir Ron. This package includes better grants for disabled students and free tuition for unemployed students.
Student leaders attacked ministers for failing to spell out what grants and loans will be available for undergraduates next year. The National Union of Students said it was already taking calls from worried sixth-formers planning to enter university in 1998, who will have to pay up to Pounds 1,000 towards their tuition fees and are anxious about what they will have to live on.
A spokeswoman said: "There's a lot of confusion and the Government has not given the details. Students are having to make important decisions in the dark."
The Government announced that graduates who earn less than Pounds 10,000 a year when they leave university will not have to repay the new-style student loans.
A graduate earning Pounds 17,000 would pay back Pounds 52 a month, less than half the Pounds 129 a month currently required.
FE Focus, page 31