UNIVERSITY bosses in Newport welcomed an agreement which will make students living in Wales exempt from top-up fees at Welsh universities.

Assembly Members yesterday brokered a deal which will mean English and Scottish students studying in Wales paying £3,000 after 2007.

The move, which is expected to be approved in a vote at the Assembly today, will see Welsh students having to pay a fee of £1,200 rather than the higher charge.

It is the first defeat for First Minister Rhodri Morgan after Labour lost the majority at the Assembly.

An independent report had recommended letting Welsh universities levy the same £3,000 charge as their English counterparts.

But the report's findings were met with hostility from opposition parties.

Now the new deal means the Assembly administration will have to stump up the cash to compensate universities for their lost income.

The cost of the policy is estimated to be around £34 million in 2007-08, rising to £53 million by 2009-10.

The deal will also see the introduction of a national bursary scheme - including incentives to study shortage subjects like maths and engineering - and a commitment to address the funding shortfall between Welsh and English colleges, estimated to be around £100 million a year.

The Assembly is also looking at ways of supporting part-time students.

Plans to exempt Welsh students studying in English colleges from top-up fees have been shelved after they were found to be incompatible with EU law.

Professor James Lusty, vice-chancellor at the University of Wales, Newport, said: "We are very pleased, all parties have worked for an outcome that will benefit the higher education sector in Wales.

"It takes away the funding uncertainty for the institutions and students and recognises the major importance that higher education has in regenerating the economy in Wales."

John Griffiths, Labour AM for Newport East, told the Argus the agreement was a sensible way forward for higher education in Newport and across Wales.

"We will be able to ensure both quality of education and access for all."

Plaid Cymru's leader in the Assembly, Ieuan Wyn Jones, said: "This agreement should encourage a higher number of Welsh students to stay in Wales."