An extra 20,000 university places for this autumn were promised by the Government yesterday.
The places, mainly in subjects like science, technology engineering and maths – the so-called STEM subjects considered vital for the future of the economy – will be funded by a one-off £270m modernisation fund for universities being set up by ministers.
The about turn comes just a week after universities were told by their funding council there would be 6,000 fewer recruits this September.
Student leaders believe the Government has been stung into action by the prospect of up to 220,000 would-be students being turned down for places this summer. Applications are running at a record high as a result of the recession – with more than 700,000 people expected to apply for the first time.
Last night Peter Mandelson's Department of Business, Innovation and Skills said the places would be made up of 10,000 extra full-time places, 5,000 part-timers and 5,000 on two-year foundation degrees – aimed at making universities more accessible for disadvantaged students. All universities will be invited to bid to the fund to increase their student places.
Yesterday's announcement stole some of the thunder from the Tories whose universities' spokesman David Willetts last week repeated his party's pledge to create an extra 10,000 places this autumn if elected. That would be financed by offering incentives to students to repay their loans early.
"Universities are vital for economic growth," said business secretary Lord Mandelson yesterday. This further investment will allow universities and colleges to build on their success and continue to expand, offering 20,000 funded places this autumn through a range of degrees students want in the subjects which business and employers most need."
The decision was welcomed by student leaders last night. "With record demand for places at a time of looming cuts, we welcome this urgent announcement to fund additional student places," said Wes Streeting, president of the National Union of Students.
Professor Les Ebdon, vice-chancellor of Bedfordshire University and chairman of the university think-tank million+, added: "Without this announcement, many applicants would have been left without a place and a large number of these would no doubt have been 'widening participation' students for whom university is proven to be a transformative experience."
However, the boost will still leave universities faced with cuts in their spending this year. The extra £270m compared with a cut of £572m confirmed last week. "Extra places for students should be a cause for celebration but with jobs at risk in both universities and colleges we will inevitably see larger class sizes and increased workloads for staff who survive the cull," said Sally Hunt, general secretary of the University and College Union.
"Anyone who doesn't think this will lead to a drop in the quality of education is sadly misguided. Other leading economies, such as France, Germany and America, are investing money in education, yet overall our Government seems intent on doing the opposite."
In addition, chancellor Alistair Darling also announced an extension of the guarantee to all 18- to 24-year-olds that they would be found jobs or training places within six months of being made unemployed. It will now continue until 2013.
Meanwhile, universities in Scotland have been told by their funding council they will receive a real-terms reduction in their spending.