Defiant Blair will press ahead with top-up fees

Tony Blair is pushing ahead with proposals to allow universities to charge higher fees for students – though not at the £15,000 a year proposed by some academics.

Mr Blair is convinced that top-up fees will have to be included in a package of measures, to be published next month, worth an extra £8b for Britain's universities.

A proposal by Imperial College, London to charge students an extra £15,000 a year, coupled with Mr Blair's support for the principle of top-up fees, created a political storm.

The row appeared to have been resolved last week when Mr Blair told MPs that "the plan published next month will not mean that parents will have to pay thousands of pounds up front in fees."

His words were wrongly interpreted to mean that he had abandoned the idea of top-up fees. Sources close to the Prime Minister say he still wants to allow universities to increase fees from their present level of £1,000 a year.

The extra fees would be paid by students after they graduated and began to earn sufficient income. Those in low-paid public service jobs would be exempt.

The Government would set a limit for the fees – likely to be well below £15,000. Even this watered-down proposal will be opposed by many Labour MPs, who say the fees will deter working-class children from entering university.

But it is likely that Chancellor Gordon Brown and his Cabinet allies will accept it because it does not require families to find the money 'up front'. Mr Brown also plans to put billions of extra cash into the universities to kick-start the new funding system. The Chancellor, who detailed in his pre-Budget report a funding rise for education of £6 billion, taking the total to £27 billion by 2006, plans to channel at least £1.5 billion more into higher education, government sources said.

The new money will "tide over" the universities while a funding scheme, in which money is earmarked for the sector from a graduate tax or a commercial-rate loan repayment, is introduced.

Experts warn it could be years before the system can finance itself. The Department for Education and Skills refused to comment on the precise levels of government funding before the publication of Education Secretary Charles Clarke's review in January. But a source confirmed there would be more up-front cash: "We are pretty clear that just as we expect individuals to make a contribution we will bear our share of the burden."

Mr Brown accepts there are implications for the Treasury in the pledge to increase levels of participation in higher education to 50 percent of all young people by 2010.