Student grants are to be reintroduced in Wales under plans set out by the assembly's education minister, Jane Davidson, on Tuesday.

A new "Assembly Learning Grant" will provide financial support for students in higher and further education at a cost of £41 million in 2002/03.

In a statement to assembly members, the education minister defended her decision to go it alone, leaving Westminster increasingly isolated with its student loan plans for funding universities.

"Wales already has a better record than any other part of mainland UK when it comes to attracting youngsters from the lower attainment groups into higher education. We want to improve on that record," said Davidson.

The new grant will be means tested and aimed at the least-well off students, with the new funding coming on top of the statutory provisions which are currently available. No grant will be paid if "residual income" is above £15,000.

To qualify, students must have lived in Wales for at least three years. The funds will then be available to them whether they decide to study in Wales or elsewhere.

Davidson said that grants would average around £700 to £800 for an estimated 43,000 students per year, with a maximum grant of £1500.

"We will continue to provide HE and FE institutions in Wales with funds which they can use to provide students from outside Wales with the same kind of financial safety net they had under previous arrangements," she said.

"The ALG will not only help individuals it will also make a real contribution to the economic agenda by encouraging everybody to aim for their highest level of achievement," Davidson added. "It is a good time to come and study in Wales."

The announcement on student funding had been brought forward following a strong hint by Mike German, leader of the Welsh assembly Liberal Democrats which share power with Labour in the devolved government, on what the administration was planning to do.

Coincidently, the move came on the day party leader Charles Kennedy was visiting Pencoed College in Ogmore to support his party's candidate for the forthcoming by-election.

Kennedy and Veronica Watkins met students to discuss issues including tuition fees and student hardship.

Speaking ahead of Davidson's confirmation, Kennedy said: "That is why I am delighted that my colleagues in the National Assembly for Wales anticipate an announcement today that maintenance grants will be reintroduced for Welsh students most in need.