The government could scrap student grants and convert them into loans or lower the borrowing repayment threshold for graduates as it looks to make cuts to ÖйúAƬ.

That is the view of Giles Wilkes, special adviser to former business secretary Vince Cable between 2010 and 2014, who was speaking shortly before the Treasury announced that the Department for Business, Innovation and Skills would have a further ?450 million cut from its 2015-16 budget.

After George Osborne, the chancellor, announced on 4 June ?4.5 billion of new measures to ¡°bring down public debt¡± for 2015-16 across government, the Treasury issued a press release in which the ÖйúAƬ sector was one of the few areas singled out.

Mr Wilkes, who is now a leader writer at the Financial Times, told a ÖйúAƬ Policy Institute policy briefing on 4 June that his colleague Danny Alexander, the former chief secretary to the Treasury, ¡°was prone to say ¡®everyone else has taken austerity; universities have not¡¯¡±.

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He admitted that he had been surprised that the coalition, when it introduced the ?9,000 tuition fee system, decided to raise the loan repayment threshold ¡°all the way up to ?21,000¡±. He went on to say that he was ¡°not sure it produced a political dividend either¡± in terms of support for the Liberal Democrats.

¡°It¡¯s very likely that that is going to come under pressure,¡± he added of the repayment threshold. ¡°That¡¯s one of the easier ones¡­it will still have political costs but hopefully not for the university sector.¡±

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On maintenance grants, Mr Wilkes said that ¡°because of the perverse way¡± government accounting rules work, ¡°it will look like an enormous saving to the Treasury to turn all of that into loans¡±.

¡°I would be very surprised if maintenance grants¡­will bear any resemblance in two or three years¡¯ time to what they currently are,¡± he said.

Mr Wilkes also said that the abolition of undergraduate number caps, announced by Mr Osborne in 2013, ¡°didn¡¯t seem to produce much political gain for the government. I wouldn¡¯t be surprised if they found ways, either explicit or implicit, of cutting down on that [extra cost].¡±

john.morgan@tesglobal.com