The Government is to spend £180m to help children from poor families stay in education until the age of 18, ministers will announce next week.
The fund will soften the blow from the Coalition's controversial decision to abolish Educational Maintenance Allowances (EMAs), which are worth up to £30 a week for 16 to 18-year-olds, depending on their family's income.
The figure is more generous than expected and follows a last-minute intervention by Nick Clegg, the Deputy Prime Minister. Only £75m was earmarked for the replacement scheme in last autumn's spending review. That was raised to £111m after pressure from the Liberal Democrats.
In negotiations alongside talks on the Budget, Mr Clegg squeezed a further £70m out of the Treasury. The deal was approved by David Cameron, the Chancellor George Osborne and the Education Secretary Michael Gove.
The majority of the new budget will be distributed to colleges to award, at their discretion, to students from less privileged backgrounds. A smaller proportion will be earmarked for automatic payments to students with special needs such as the disabled. Mr Clegg also won a pledge that the amount of money being spent would be reviewed, which could boost the fund in 2012-13.
Conservative ministers have argued the current scheme hands money to students who do not need it and should be targeted towards the most disadvantaged children. But supporters of the programme say it enables pupils to stay on in education, especially when payments are linked to attendance, boosting their chances of going to university.
The Budget continued to generate controversy yesterday as surveys suggested motorists had not reaped the full benefit of the 1p cut in petrol duty announced by the Chancellor.
The AA said the average price of a litre of unleaded petrol was 132.93p yesterday, compared with 133.53p on Wednesday before the Budget. Edmund King, the AA president, said: "The latest fuel prices clearly show that not all garages have passed on the Budget's 1p cut in fuel duty. Drivers have long memories and will remember those garages that have not passed on the cut." Experian Catalist found the average price fell from £1.33.5p to £1.32.9p a litre.
Mr Cameron threatened to order an investigation by the Office of Fair Trading if the 1p cut was not passed on fully. He told a press conference in Brussels: "Compared with what was going to happen, it's a 6p reduction. And, of course, I want to see that passed on by garages. We have done what we can to cut tax, it is now right that the market should respond."
Some 71 per cent of people believe Mr Osborne should have done more to help tackle rising fuel prices, according to a ComRes survey for ITV News, while 51 per cent think their personal financial situation will get worse after the Budget and 44 per cent do not think it is right to describe it as a "Budget for growth".