A LEGAL loophole that could allow thousands of people in other parts of the UK free university places in Scotland is more widespread than first thought.

Last week it emerged students from Northern Ireland could avoid fees by taking dual Republic of Ireland citizenship and applying as EU students, which would result in them getting their fees paid under European equality law.

The Scottish Government played down the development, saying it would only apply to a small number of people.

However, the problem could be much more significant because anyone who has an Irish grandparent who lives in the UK can obtain an Irish passport and apply under the same loophole.

Nearly 625,000 people living in England and Wales claimed Irish ethnicity in the 2001 census, but as many as six million across the UK are estimated to have at least one Irish grandparent.

In some cases, UK residents with an Irish great-grandparent could apply for an Irish passport.

The children and grandchildren of other European nationalities, such as Italians and Eastern Europeans living in England and Wales could also use the same loophole.

Under new legislation, students from England, Wales and Northern Ireland should pay fees of up to £9000 a year to attend Scots universities, while Scots students pay nothing.

However, the loophole raises the prospect of a flood of applicants from around the UK.

Last night, universities called for clarity from ministers.

The development may damage a new private income stream for universities, with the costs picked up by the taxpayer. It could also mean greater competition for places in Scotland.

The impact is still unclear and there may also be disadvantages for students applying under the EU route. There is also a legal question mark over whether a student's nationality takes precedence over where they live.

Gordon Watson, president of the University and College Union Scotland, which represents lecturers, said the funding system was in "chaos".

He said: "Those with a dual- European passport will compete with Scottish students for the capped number of places in clearing and a huge rise in such applications is likely next year.

"This is another incidence that shows the introduction of fees for UK students outside of Scotland will play havoc with the admissions process as universities try to maximise student intake from those diminishing number of UK students who will pay fees."

Robin Parker, president of NUS Scotland, said: "We must see clarity on this issue so students can make an informed choice about what places are available and what support they will be able to receive."

A spokeswoman for Universities Scotland, which represents university principals, said: "Based on the most recent statistics available, there is no indication that Scotland's universities have seen a rise in applicants holding an Irish passport.

"Universities Scotland con-tinues to seek clarity from Government on this issue in the interests of learners making choices about where to study."

A Scottish Government spokesman said: "Students who hold dual-UK and EU nationality have been able to apply for fee support as non-UK EU nationals at Scottish universities for a number of years, but there is no evidence to suggest this has ever happened on a significant scale or that it is likely to.

"Eligibility for claiming nationality varies by state and it is for the student to prove they hold EU nationality before the relevant date. We closely monitor application trends and are prepared to act if it appears that issues such as this are arising and we are also exploring the introduction of an EU management fee, within the bounds of EU law, with the issue recently being raised with the EU commission."