The idea, which Times Higher Education understands is likely to be explored in the upcoming White Paper on higher education reforms, would remove students who do not take out state-funded loans from an institution¡¯s cap on numbers.

Currently, about 14 per cent of home students do not take out a fee loan. But if they are undergraduates taking a first degree, they still count towards the limit on numbers for universities, which is imposed to ensure that public spending is controlled.

However, with ministers keen for ways to allow universities to expand without additional costs to the Treasury, it is understood that the White Paper may be used to float the idea of removing self-funding students from the cap.

This group of students may include not only those with families rich enough to pay annual tuition fees of up to ?9,000, but also those who receive sponsorship from companies, charities or community organisations.

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But the proposal could still spark discomfort in the coalition government and beyond, given that it might lead to accusations that universities will have an incentive to recruit students based on their ability to pay.

As a result, the government seems likely to ask in the White Paper for the sector to come up with suggestions over how fairness could be safeguarded.

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Ministers have repeatedly referred to their desire to let universities ¨C and alternative providers ¨C recruit more home undergraduates if that growth does not cost the taxpayer money.

The ¡°off-quota¡± proposal was raised by David Willetts, the universities and science minister, in a speech to Universities UK¡¯s spring conference earlier this year.

He asked how it could be achieved in a ¡°needs-blind¡± and ¡°socially progressive¡± way, although the precise detail of what he was referring to was not mentioned.

Vince Cable, the business secretary, also raised the issue in his address to the Higher Education Funding Council for England last month.

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simon.baker@tsleducation.com