Chancellor George Osborne's Autumn Statement contained the pledge and said that the Government expected it to result in an extra 60,000 people being able to go to university each year.
Student places in England and Wales are funded through the student loans system, and the Government's Department of Business, Innovation and Skills (BIS) limits the number of places that are funded for those who did not achieve the grades ABB or above at A level. Institutions can give places to as many students achieving those grades as they like.
The Government today announced that it would increase the limit on funded places by 30,000 and would remove the limit by 2015.
"Next year we will provide 30,000 more student places – and the year after we will abolish the cap on student numbers altogether," said Osborne's statement. "Extra funding will be provided to science, technology, and engineering courses. The new loans will be financed by selling the old student loan book, allowing thousands more to achieve their potential."
"This is the opposite of what most observers were probably expecting the Government to do," said universities expert Nicola Hart of Pinsent Masons, the law firm behind Out-Law.com. "Last week the headlines were about the coalition reversing its policy of encouraging growth in the higher education sector. A miscalculation about the uptake and recoverability of taxpayer-funded student loans was reported to leave BIS with a risk of a £5bn loss. BIS announced it was curtailing funded recruitment by a number of private HE providers with immediate effect."
"Subject to sufficient cash being raised from the student loan book to support the Chancellor’s promise, the supply of extra funded places should be good news for universities, for other higher education providers and for prospective students.
The Office of Fair Trading has launched an information gathering exercise into whether there is effective competition between universities.
Competition law expert Guy Lougher of Pinsent Masons said that the proposed changes to funding would not be likely to derail any OFT investigation.
“The announcement of the Government’s intention to raise, and then abolish, the cap on student numbers means that more places will be available for students," said Lougher. "This could well in turn increase potential competition within the higher education sector. It is not, however, likely to constrain the OFT’s scrutiny of the sector through its ongoing call for competition."
"In a way, the announced changes mean it is even more important for the OFT to assure itself now that there is adequate and appropriate information available upfront to students to allow them to make informed choices, that competition is already working effectively between universities, and that those facets are not being needlessly affected adversely by Government policy and regulation," he said.
The Government had previously announced that it would introduce student number controls for the alternative, or private, providers of higher education. Hart said that this plan was likely to continue, and that the cap being lifted appears to be the cap on the combined total of places at private institutions and those institutions that were traditionally state funded.