More than 100,000 of the brightest A-level students will see their chances of going to some of the country's most selective universities rise this summer.
Universities are being told they can recruit as many students as they want - providing they have at least an A grade and two B grade passes at A-level.
The move is designed to increase competition for places - with 115, 000 would-be undergraduates being able to trawl for places under the scheme.
Last year the scheme was limited to 85,000 students - just those with two As and a B grade pass.
Oxford and Cambridge are unlikely to increase their intake as a result of the new dispensation - but other Russell Group universities are expected to do so.
The Higher Education Funding Council for England is also earmarking 5,000 extra student places for universities charging below £8,200 a year for their course. Most are charging the maximum £9,000 a year.
Hefce is also relaxing the penalties universities face for over-recruitment - allowing them a three per cent tolerance above or below their target number before fines kick in. This year saw fines at their lowest level for years - with nine universities paying out just £1million for over-recruitment.
“These initiatives are intended to meet the Government’s twin aims of increasing dynamism and improving student choice while maintaining control of the student support budget,” it said.
Sir Alan Langlands, chief executive of Hefce, described this year’s budget as showing that higher education was “in quite a secure place at quite a difficult time”, adding: “The penny has dropped with the Government. Everyone sees that higher education, science and research are good for the economy.”
Overall, Hefce is distributing £4.47 billion to universities with cash for teaching falling from £3,233 last year to £2,325. However, this is more than made up for by increased income from student loans.
Sir Alan added that there were “a number of pressing issues” including a drop in part-time and postgraduate recruitment.
“There are early signs of subject vulnerability and a marked decline in numbers of mature students which suggests that we will need to be alert to changes in participation - in particular by disadvantaged groups,” he added.