Top-up fees are a gamble which can only harm the party and the Prime Minister

The scheme will reward the universities of the élite few, whilst discriminating against the universities attended by the majority

Poker, I understand, is enjoying a modest revival in popularity. Even listeners to The Archers have had to grasp the basic rules in order to follow recent plot lines. But it is one thing for poker to become a pastime in Ambridge. It is quite another for it to provide the inspiration for Downing Street's strategy to face down Parliament. Yet it is hard to find a better analogy than poker for Number 10's calculation that over top-up fees the rebels are bluffing and will throw in their hand if the Prime Minister keeps raising the stakes.

Poker, I understand, is enjoying a modest revival in popularity. Even listeners to The Archers have had to grasp the basic rules in order to follow recent plot lines. But it is one thing for poker to become a pastime in Ambridge. It is quite another for it to provide the inspiration for Downing Street's strategy to face down Parliament. Yet it is hard to find a better analogy than poker for Number 10's calculation that over top-up fees the rebels are bluffing and will throw in their hand if the Prime Minister keeps raising the stakes.

Ministers still show no grasp that what worries backbenchers is the principle of the marketisation of higher education, and the inequity of variable fees in rewarding and entrenching the privilege of those élite universities who can charge a premium for prestige. The Government's attempts to defuse the rebellion are therefore fundamentally flawed as they rely on concessions at the margins, while preserving intact the very issue of principle that has provoked the rebellion.

It is unlikely that yesterday's concessions will be any more successful than previous attempts. The increase in maintenance grants to £1,500 for students from low income families is welcome, but hardly unexpected. Those same students will have received £1,500 a year in educational maintenance awards while teenagers at school, and it was always loopy to imagine they would be attracted to going on to university by a grant that went down as their costs went up. The only sensible conclusion is that ministers always intended the student grant to be the same as the school grant, but kept that to themselves to provide a late "concession."

The central proposal for variable fees remains the same as before and just as objectionable. Downing Street is now briefing that variable fees are central to producing the diversity and choice to which modern public services must aspire. But there is probably no field of the public services which already provides more choice than higher education. Students are free to apply to any university. Variable fees will do nothing to widen diversity, but will introduce a price differential that will diminish the range of choice.

Yesterday, Professor Steven Schwartz of Brunel University appeared on the Today programme to offer his confident opinion that working-class teenagers would not be deterred from applying to a top university by a top-up fee of only an extra £1,000. He then torpedoed his own argument by asserting with even greater confidence that once introduced variable fees will be expanding fees. On that point, the rebels would heartily agree with him. We are being asked to cross the Rubicon of accepting a market price for higher education. Once that principle is established, there is no logical reason why fees should not rise to cover the full cost of a course of £15,000 plus, or more if the market will bear it. Indeed, yesterday's Bill includes a mechanism to raise the maximum fee by order.

The Government has a credibility problem here. It is hard for ministers to sound convincing that the ceiling of £3,000 will not change in the next Parliament, as we were elected on a manifesto which promised we would not introduce top-up fees at all in this Parliament.

The central problem with variable fees is that they will have a variable effect on the distribution of revenue. The élite universities will be able to cash in on their status, and their largely public school student base, by exploiting their new freedom to charge commercial fees. Perversely, the new universities who are at the forefront of the Government's drive to widen access to working-class students will be inhibited from increasing revenue because they do not enjoy an élite status on which to trade, and in any case their student base does not have that kind of money. Ministers come close to admitting this reverse redistribution when they muse that it is "fairer" for students at top universities to pay more.

But it gets worse. Yesterday's announcement explicitly placed on universities the obligation of providing bursaries for their own poorer students out of their own revenue from fees. For Oxbridge, this will be a dawdle. They can afford to be generous out of their high income from fees to the handful of low-income students who survive their selection process. But the new universities face a disproportionate bill for their largely working-class students.

It is an offence that a Labour government should have come up with a scheme that will reward the universities of the élite few whilst discriminating against the universities attended by the majority. But this result is no accident. It is a deliberate consequence of a proposal that originated with the top universities and was sold to the Prime Minister as a way of retaining their special status. The whole purpose of variable fees is to provide a top-up income to Ivy League universities over and above the capitation system which rewards all universities evenly.

In a more confident time, the Labour government of the sixties made it a point of pride to carry through a major expansion of university places at public expense. They did so because they recognised that higher education was a public good which benefited the country as a whole. It would never have occurred to Harold Wilson to ask why a dustman should pay to educate a doctor, as he would have taken the broad view that all society benefited from a steady supply of doctors.

The Wilson government did not back down over In Place of Strife because it might have been defeated in Parliament. Harold Wilson did not persist because he was not willing to split the Labour Party. Notably that does not appear to be an inhibition on Tony Blair. In one sense, this is odd. Nobody grasped more clearly than Tony Blair that the lesson of the eighties was that a divided, quarrelling party did not win elections. He has successfully transformed Labour into a disciplined, coherent campaigning machine. It would be a tragedy worthy of Greek drama if Tony Blair himself were now to insist on producing a division of his own creation in the last year before a general election.

There is also a democratic principle at stake which should be of wider concern than Labour members. On the substance of the issue, there is no dispute that most MPs are against variable fees. The only speculation is whether Tony Blair can yet push his plans through the Commons by turning it into a vote of confidence in himself. The Government's overall record is good and no Labour MP would have any hesitation in backing it on a motion of confidence. But if every vote on each issue can be turned into a test of the authority of the Prime Minister, where does that leave the authority of Parliament? What is the point of electing over 600 MPs if they are never to exercise their own best judgment of what is in the national interest and which policies are consistent with the manifesto on which they asked their constituents to give them a mandate?

Poker is a zero sum game. If Tony Blair persists with this gamble, there must be a loser. It only remains to be seen whether it is himself, the Labour Party, or parliamentary democracy.