Starting in 2002, undergraduates whose tuition fees are paid in full by their local education authority - that is, those from families earning less than pound;20,000 a year - will get bursaries worth pound;1,000 in their first year and pound;500 in each subsequent year of their course.

The scheme will be funded initially by the pound;1m private donation, to be augmented by a major fund-raising initiative. Around 400 students are expected to be eligible in the first year. Oxford says it will be “the most comprehensive scheme of this kind to be offered by any UK university.”

But Cambridge was quick to point out that it already has a scheme in operation that is in some ways more generous. Its Newton Trust Bursaries, funded by the Isaac Newton Trust, the colleges and external sponsors, offer up to pound;1,000 each year to undergraduates exempt from fees studying subjects other than teacher training. About 500 bursaries for new students and a similar number for students who started in earlier years were offered in 2000-2001.

Susan Stobbs, director of admissions for Cambridge, said colleges could now follow a “needs-blind” admissions policy. She did not know of any student who had given up their studies because they were short of money, she added.