Most areas of higher education policy have been devolved to Wales with the exception of student finance.

Jane Davidson believes the Assembly should debate student finance

But UK Education Secretary Charles Clarke said on Wednesday that he was considering giving the Assembly new powers in that area.

It followed his statement in the House of Commons that universities in England will be allowed to charge up to �3,000 in top-up tuition fees, to be paid after a student has graduated and started earning.

At the moment students in Welsh and English universities pay fees of �1,125 a year, at the start of the year.

'Not devolved'

In a statement, Ms Davidson told assembly members on Wednesday: "There is one area in which policy is not devolved.

"This relates to the framework of funding for student support and I am delighted that central government has decided in favour of the approach that we have been pressing...ie. for the abolition of up-front tuition fees.

"We firmly believe that this (graduate contribution) should be payable after the education experience.

"We in Wales will also need to respond to new circumstances and may need new powers to do so.

"We strongly believe that the assembly should have the scope to take these decisions itself."

Jane Davidson...didn't rule out universities like Cardiff and Swansea looking at increasing the existing fee of �1,100 to a figure above that if conditions require Peter Hain

Ms Davidson added that the assembly government believed that up-front tuition fees and top-up fees discouraged students from the most disadvantaged backgrounds from entering into higher education.

She said: "Top-up fees will not be introduced until 2006 which gives us time for serious debate in Wales...on how this proposal may or may not apply in Wales."

But Conservative education spokesman Jonathan Morgan said he was concerned that Welsh higher education institutions would suffer financially if the Welsh Assembly Government did not introduce top-up fees.

"If you as a government get the power over top-up fees, decide not to introduce top-up fees, there could be a substantial number of young people choosing to study in Wales because it would be the cheaper option.

"There will be a funding gap between universities in Wales who will not be able to charge top -up fees and universities in England who will."

Shadow Education Minister Helen Mary Jones of Plaid Cymru, said: "Yesterday Peter Hain was spinning the story that Wales would be a student paradise and that the Assembly would be given the biggest boost to its powers since devolution in the area of student finances.

Peter Hain has been in talks with Charles Clarke

"We had no indication from the Minister as to how this will be achieved."

Welsh Secretary Peter Hain told BBC Radio Wales that the terms under which powers would be devolved to Wales would take time to finalise.

He said: "I have been in discussions with Charles Clarke and others to make sure we get this right - but it will take some time.

"I certainly don't want Wales to be short changed because we get the arithmetic wrong."

He added that some Welsh universities could charge higher tuition fees to make up any funding shortfall.

"Very significantly, Jane Davidson...announced this afternoon in her statement that she didn't rule out universities like Cardiff and Swansea looking at increasing the existing fee of �1,100 to a figure above that if conditions require," he said.

"What we need to ensure is that our top universities in Wales are world class".