Manchester terror attack: Benefits 'paid for bomb'

Britain is at the highest security alert after the Manchester bombing. Photo / AP

The Manchester suicide bomber used taxpayer-funded student loans and benefits to bankroll the terror plot, police believe.

Salman Abedi is understood to have received thousands of pounds in state funding in the run-up to Monday's atrocity, even while he was overseas receiving bomb-making training. Police are investigating Abedi's finances, including how he paid for frequent trips to Libya - where he is thought to have been taught to make bombs.

It comes as Assistant Commissioner Mark Rowley, Britain's most senior counter-terrorism officer, said detectives had made "immense progress" in dismantling Abedi's terror network.

Abedi's finances are a major "theme" of the police inquiry amid growing alarm over the ease with which jihadists are able to manipulate Britain's welfare and student loans system to secure financing.

One former detective said jihadists were enrolling on university courses to collect the student loans "often with no intention of turning up".

Abedi was given at least 7000 ($12,700) from the taxpayer-funded Student Loans Company after starting a business administration degree at Salford University in October 2015. It is thought he received a further 7000 in the 2016 academic year even though he had already dropped out of the course.

Abedi, 22, never held down a job, according to neighbours and friends, but was able to travel regularly between the UK and Libya.

He also had sufficient funds to buy materials for his sophisticated bomb while living in a rented house in south Manchester and then rented two more properties before the attack.

Abedi withdrew 250 three days before the attack and transferred 2500 to his brother Hashim in Libya.

Prof Anthony Glees, director of Buckingham University's Centre for Security and Intelligence Studies, said: "The British system makes funds readily available to jihadist students without checks on them. There needs to be an inquiry."

The Government has previously admitted it has no idea how many terrorists could be using benefits and student loans to finance activities.