Mr Cable faced questions from MPs on the Business, Innovation and Skills committee today, looking at issues arising from the publication of the department's annual report and accounts.

He said: "The number of students in the current academic year is lower than expected. That's not because of lack of demand, because universities are still heavily oversubscribed.

"But it was primarily because universities weren't able to fill their places, partially as a consequence of the AAB system.

"So there was a shortfall in numbers. And the short-term impact of that means we've spent less than we thought we would."

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Paul Blomfield, Labour MP for Sheffield Central, said the government's changes to student number controls had brought about the "extraordinary position where many of our universities, and indeed some of our top universities, have several hundred vacant places".

Mr Cable said: "Yes, it has had that negative side effect. It has had positive effects too. Universities have been clamouring for years to have greater freedom from numbers control, students have greater freedom of choice."

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He added: "We do regret the negative aspects of it, but we think there are compensating positives to be taken from this experiment."

Mr Cable also faced questions from the committee chair, Labour MP Adrian Bailey, about whether BIS has taken into account the inflationary impact of higher tuition fees, which could push up spending on index-linked benefits in other departments.

The ÖйúAƬ Policy Institute recently said this knock-on effect from higher fees could cancel out some of the savings BIS made in slashing the teaching grant.

Mr Cable said that as fees were "not a cash payment, there's no reason why this should figure in the price index at all...I don't follow the logic".

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However, the Office for Budgetary Responsibility said in its November 2011 Economic and Fiscal Outlook report: "We judge that the average increase in tuition fees in 2012 could add around 0.2 percentage points to CPI inflation in the fourth quarter of 2012."

john.morgan@tsleducation.com