Farmers and the self-employed face cut-backs in grants to their student dependents if the Irish government accepts a recommendation to take assets and capital into account.

At present grants are awarded on the basis of family income but a report prepared by an expert advisory group appointed by Niamh Brearthnach, the education minister, suggests that assets and capital should be taken into account as well.

The report was completed several months ago but the cabinet has only now agreed to release it.

If the proposals are accepted, family and holiday homes, investments, farms, milk quotas, and businesses would be considered when eligibility for awards is determined. Among examples cited is that of one individual with net assets of IrPounds 500,000 (Pounds 495,000) but a reckonable income of only IrPounds 6,228 whose children qualified for a full grant.

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Many trade unionists welcomed the proposals. They say that middle-income workers on PAYE are being penalised and cannot get grants while farmers and the self-employed are able to reduce their reckonable incomes.

Those in the IRPounds 20,000-Pounds 30,000 bracket are worst hit by the present arrangements. The ceiling for part-maintenance is now just under Pounds 24,000 a year but to qualify an applicant would need to come from a family of eight or more children.

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The report says there is public dissatisfaction that "obvious material wealth" is not taken into account in assessing grant eligibility. It says it is" not unreasonable" for people to use some of their wealth over a certain threshold to finance their children's studies as "expenditure on higher education is a capital investment".

But the report was immediately attacked by the main opposition Fianna Fail party as a "wealth tax by the back door". Furious farming organisations demanded an immediate meeting with the minister to discuss what they termed "ludicrous" proposals which are also likely to cause tension between the governing coalition parties.

The minister's own party - Labour - is likely to support it, as is the tiny Democratic Left but it will cause major difficulties for Fine Gael which still attracts a lot of farming votes.

The report added fuel to the debate over the funding of higher education and in particular the discussions over the government's plan to phase out tuition fees, which was eventually announced this week. At the same time tax relief on covenants, used by many parents to help pay for their children's education, is to be withdrawn.

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The decisions were confirmed in the annual budget which was introduced by Ruairi Quinn, the finance minister, on Wednesday.

Some ministers had serious misgivings over the scrapping of tuition fees which was initially proposed by the education minister. She wanted the fees withdrawn immediately but a compromise was arrived at under which the abolition of fees would be phased in.

Average fee levels currently range from Pounds 1,600 for arts courses to Pounds 2,200 for medicine.