Blair is forced to retreat in top-up fee row

Up-front payments by parents ruled out as 20,000 students demonstrate in capital

Tony Blair was forced into a partial retreat over student funding yesterday when he ruled out making parents pay thousands of pounds "up front" in university tuition fees.

But with about 20,000 students demonstrating in London against the plans, the Prime Minister gave a clear hint that he still wanted to allow so-called Ivy League universities to charge higher fees.

The Tories claimed that Mr Blair had been forced into a "spectacular U-turn" after he conceded that the Government's review of higher education finance would not impose large fees on parents.

Speaking in the House of Commons, he accepted that asking for fees up front could undermine his ambition to increase the number of children from poorer backgrounds at university.

Mr Blair refused to be drawn on reports that Gordon Brown, the Chancellor, had described top-up fees as "ridiculous". Helen Liddell, the Scottish Secretary, became the latest cabinet minister publicly to criticise the idea this week.

Iain Duncan Smith, the Tory leader, said: "This is a humiliating and spectacular U-turn by the Prime Minister. His policy on higher education is in tatters."

But Downing Street sources said the Prime Minister had kept alive the idea of variable rates of fees for different universities. Oxford, Cambridge and other elite institutions could still be allowed to charge higher fees than others.

The Government will finally end speculation about its plans when it publishes its long-awaited White Paper on higher education funding in January. Its twin aims are to bridge the estimated £8bn funding gap facing universities, largely due to increased student numbers, and to improve access for those from lower income groups.

But the controversial idea of introducing top-up fees of more than £10,000, as suggested by some universities, has triggered panic among Labour MPs and many Cabinet ministers.

Mr Brown is understood to now favour some form of graduate tax that would raise extra funds once students reach higher income brackets.

Charles Clarke, the Education Secretary, said last night that there was a "legitimate debate" going on between ministers about the issue.

Mr Blair said at Prime Minister's Question Time that the status quo was "not an option" and that extra funds had to come from the taxpayer, parents or students, or a combination of all of them.

"If it comes from the parent, obviously the danger is if parents are forced to pay large amounts of money up front, that could indeed deter people from university education," he said.

"There will be a review. We will publish it in January and let me tell you what it will do. It will increase access to university. It won't mean that parents are having to pay up front thousands of fees and it will allow people the chance to go to university."

In answer to Charles Kennedy, the Liberal Democrat leader, Mr Blair said the review would look at the option of charging "variable" fees. Elite universities could charge more than former polytechnics.

MPs claimed last night that the Government was moving towards the idea of a possible mixture of sources of new funding.

While the initial Metropolitan Police estimates were of 6,000 protesters, the National Union of Students insisted 23,000 people had joined its march.