The education minister Baroness Blackstone said that all 19,000 students who had received deferred offers of university places for 1998 would be exempt throughout their courses from the Government's decision to charge pounds 1,000-a-year tuition fees and abolish maintenance grants.
Ministers said at the weekend that only those students who did at least three months' voluntary work would be exempt - around 2,000. But the announcement led to protests from charities, students and university administrators who predicted chaos as thousands of applicants tried to get into university this year.
The National Union of Students said that it would back a legal challenge on behalf of students taking a "gap year", claiming that it would be a breach of contract to charge them tuition fees.
The change of heart came as the annual scramble for university places began with the publication of this year's A-level results, distributed to candidates today. The pass rate is up by 1.3 per cent to 87.1 per cent, the 16th successive rise. However, the percentage awarded an A grade has remained the same, at 16 per cent.
Students who have failed to get the grades they need to meet their conditional offers of places can enter the clearing process run by the Universities and Colleges Admissions Service ( UCAS) which matches students to spare places.
This morning there are 24,000 courses with vacancies in British universities and higher education colleges - an increase of 19 per cent on last year. The rise could be the result of an increase in the total number of courses. The biggest increase is in modern languages, which account for more than 15 per cent of all vacancies, and in engineering and business.
News of the improved pass-rate prompted the annual controversy over exam standards. The Institute of Management warned that employers were increasingly concerned about the value of "Britain's gold standard."
But Baroness Blackstone said: "We are absolutely committed to maintaining standards in all national qualifications. There are rigorous procedures in place to ensure that standards are maintained between examinations boards, between subjects from year to year."
The U-turn by ministers over gap-year students should make the clearing process less frenetic than had been expected.
David Willetts, Conservative education spokesman, said that the Government had conducted a "complete shambles. They began by denouncing people's concerns over this as scaremongering", he said. "Then they announced, on an unattributable basis, a concession that turned out to be tiny.
"They have caused unnecessary concern and anxiety to thousands of students by their incompetence."
Government sources said that the decision had been taken "in the interests of fairness and administrative simplicity". They had always intended to look at the issue but had no firm figures until last Friday. "We have listened to representations made by industry and voluntary groups. This is an example of a listening government," the sources said.
But the national volunteer agency, Community Service Volunteers, called for a year's exemption from fees for every young person who invested between four and twelve months in service to the community during a gap year. Ministers are understood to be considering the suggestion.
David Hart, general secretary of the National Association of Head Teachers, who wrote to David Blunkett, the Secretary of State for Education, calling for a rethink over the fee waiver, welcomed the Government's announcement.
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