A Conservative plan to directly fund 10,000 extra university places for three years had to be abandoned by the coalition government because of the date of the general election and problems at the Student Loans Company, it has emerged.

The places, which are instead being provided under the Labour-instigated University Modernisation Fund (UMF), will not be allocated extra teaching funds beyond 2011 because there "simply wasn't time" to replace the scheme, said David Willetts, the universities minister.

In their election manifesto, the Tories said that they would encourage early student loan repayment and use the money to create 10,000 places, which the party intended would be funded for the duration of degree courses.

The UMF, announced in Labour's last Budget, allocated ?250 million for 20,000 places in 2010-11, but universities were expected to use the money to find efficiency savings that would cover the cost of the places in subsequent years.

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After taking office, the new government decided to halve the extra places and cut financial support to ?132 million due to the lack of quality bids and the need to contribute towards the Treasury's immediate spending cut of ?6.2 billion.

However, a revised grant letter to the ÖйúAƬ Funding Council for England, published last week, confirms that the government is sticking to Labour's UMF funding formula, which Mr Willetts has derided as a piece of "fiscal magic".

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He told Times ÖйúAƬ in May: "It's not at all clear whether (Labour's) places were fully funded for three years, unlike our proposal."

It is understood that the coalition had to relent and proceed with the UMF because by May, when it gained power, the scheme was well under way and bids had been received.

In addition, a report from PricewaterhouseCoopers revealed lingering problems at the Student Loans Company that militated against another change in the system to encourage early repayment.

Mr Willetts told THE this week: "By the time the election had come around, there simply wasn't time to start implementing a new process from scratch ... for the next academic year."

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The coalition announced in its emergency Budget last month that it would still "look at options" for the early repayment of student loans, although the timescale is unclear.

Post-1992 teaching-focused universities are the main beneficiaries among the 57 institutions that have won a share of the extra places announced last week. About 8,000 of the new entrants will be full-time and 2,000 part-time.

The Open University was granted the most full-time equivalent (FTE) places - 1,500 - with other big allocations going to Anglia Ruskin University (540) and Manchester Metropolitan University (372).

Hefce has also announced that 1,712 student places will be shifted to science, technology, engineering and mathematics (STEM) subjects next year after receiving ?4 million worth of successful bids to provide such courses. The figure is well below the ?10 million allocated for the task earlier this year by Hefce, which originally hoped to support the movement of 3,000-6,000 places.

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Meanwhile, universities have been hit by a surprise cut in their July grant after Hefce told the sector that ?20.8 million in teaching funds would be withdrawn this academic year because of ?82 million in immediate government spending cuts.

Andrew McConnell, chair of the British Universities Finance Directors Group, said the move, announced in the revised grant letter, was "unexpected", but stressed that the cut was manageable.

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simon.baker@tsleducation.com