The business secretary, whose powers as secretary of state are used to grant individual private providers access to the public loans system for their students, also said the benefits from increased private provision were “ambiguous”.

Speaking at a fringe meeting at the Liberal Democrat conference in Glasgow on 7 October, he suggested there were legal obstacles preventing the government from exercising greater control over public funding at private providers.

The total bill for public-backed student support at private providers is projected to soar to nearly £1 billion this year, according to government figures, after the coalition encouraged private colleges to play a greater role in the provision of higher education.

Some argue that this could put added pressure on other parts of the Department for Business, Innovation and Skills budget, including funding for universities and research.

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Mr Cable told the meeting, co-hosted by the Social Market Foundation thinktank and Sutton Trust: “The aspect of [the expansion of student numbers] that worries me…is that what we have done is opened the door to private sector alternative providers, including for-profit companies. Some of these have been very good, really outstanding, innovative institutions.

“But there’s a lot of dross and some of those operations are providing cheap and cheerful courses, recruiting students who then get maximum grant…We’ve had to crack down on them pretty hard because there was some immigration abuse taking place in them.”

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Mr Cable added that there was a question over “how much do we really want to encourage this private provision, which is expensive to the state and ambiguous, I think, in its wider benefits”.

The government’s position, as stated on an official website, is that: “Courses delivered wholly or partly by private higher education providers must be designated by the Secretary of State [Mr Cable], so that students can receive financial help in the form of a student loan or grant.”

Critics, including the University and College Union, have argued that the government has failed to undertake proper checks on private providers before granting them designation.

51�Թ� asked Mr Cable why he had allowed his powers to be used to grant for-profit colleges that were in his own words “dross” access to public funding.

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He replied: “I brought in fairly draconian controls about a year ago when we discovered that there was abuse in the sector. The reason why we can’t just say ‘this is a nuisance and it costs money, let’s close the whole lot down’ – there is a legal reason and there are legitimate institutions. As the law stands at present their students can gain access to student grants and loans.

“And they would sue the government if we stopped them doing so, unless the law changed. We’re walking a balance here. But I’m certainly aware of the problem it presents.”

john.morgan@tesglobal.com