Labour MP Paul Blomfield predicted yesterday that Tory plans to flog student debt to City sharks could have been sunk by the Royal Mail privatisation scandal.

The Sheffield Central MP said the government will not find privateers willing to pay enough for the £40 million sell-off plot to pass ministers’ value-for-money tests.

He said the Royal Mail rip-off has shown privateers will only rob public assets at bargain-basement rates.

“It looks as if they won’t be able to sell it,” he said.

The MP, who sits on Parliament’s business, innovation and skills select committee said that leaves government plans in crisis.

Tory Universities Minister David Willetts has earmarked cash from the planned sale to fund unlimited undergraduate places at English institutions.

But Mr Blomfield said that there is now “clearly no funding plan to lift the cap on undergraduate admissions.”

It comes just a week after it was revealed that almost 50 per cent of students paying £9,000-a-year tuition fees won’t earn enough to ever pay back their loans.

The Labour MP added: “It means for all the chaos and pain it created for students, the new system costs the country more.

“It’s crazy stuff.”

Mr Blomfield was speaking during a lobby organised by lecturers’ union UCU over cuts to further and higher education.

Union members slammed the damage the £460 million cut to the adult skills budget is having on working-class people who want to get back to learning.

Liverpool-based lecturer Steve Addison said people who failed in school were being “robbed of their second chance.”

UCU president Simon Renton drove busses before going to university at 26 and is now a history academic.

He said Britain won’t “get back some of the opportunity that people of my generation had or our children had unless we fight for it.”

Lecturers pressed Mr Blomfield over whether his party was committed to reversing the cuts.

He said funding was being debated but that the party would not make a commitment until closer to the general election.