Postcodes have been widely used to assess the funds needed to widen student recruitment in disadvantaged areas. But Chris Hughes, chief executive of the Further Education Development Agency, said he had grave doubts about their effectiveness.

Mr Hughes told the Commons education and employment select committee, that “prior educational attainment rather than where a student lives” gave a clearer indication of the support a student needed than the postcode method.

The method had proved very successful in Wales, but in England, the mix of rich and poor in the same borough threw up stark anomalies. The classic case was Notting Hill in London where the very wealthy and most disadvantaged shared a postcode.

The Further Education Funding Council currently uses postcodes as a deprivation indicator. Students from particularly deprived areas can attract up to 12 per cent more cash for colleges, regardless of their actual levels of poverty.

The FEFC fundamental review group is investigating the effectiveness of such measures and the FEDA has launched a major study of the ways in which prior educational achievement may be used as a more effective measure of future success.