Treasury at war with No 10

A fierce new war between Downing Street and the Treasury broke out today in the wake of Tony Blair's hair's breadth victory over university tuition fees.

Mr Blair's supporters accused the Chancellor of "grandstanding" after he persuaded rebel leader Nick Brown and a handful of other MPs to switch sides at the last minute.

Without the switchers, Mr Blair would have lost his flagship Higher Education Bill in a catastrophic defeat. Instead he squeaked home by just five votes, 316-311.

University vice-chancellors today breathed a collective sigh of relief - but spoke of their fears that the Government might be defeated at a later stage in the Bill's passage.

Inside Downing Street there was huge suspicion at the motives of Gordon Brown, who in some quarters this morning was being hailed as the Prime Minister's "saviour" .

His conversion of Nick Brown and other rebels was a breathtaking display of power politics, but failed to make the revolt vanish altogether.

Mr Blair's aides and Education Secretary Charles Clarke were furious that Nick Brown said he had won new concessions from the Government - including a promise of extra cash.

No10 and the Education Department put out a starkly different version, claiming the rebels had been offered nothing new. Party whips were furious over the mixed messages issued during their desperate last-ditch drive for votes.

At one stage Nick Brown even spoke by phone to Mr Blair - though the Prime Minister was urged by his inner circle to concentrate on the Hutton Report, delivered to No10 at noon yesterday.

The narrowness of the victory - dubbed a " humiliation" by the Tories - weakened Mr Blair, sparking a new round of speculation among Labour MPs that he will not lead the party into the next election.

Rebel leaders claimed they would fight on - particularly against giving universities the right to charge students variable fees of up to £3,000 a year. Backbencher Ian Gibson insisted: "I will never sleep until I get rid of variable fees."

If just three Labour MPs who supported the Government had not done so last night, Mr Blair would have become only the third Prime Minister in 100 years to lose a flagship domestic Bill at its main Commons hurdle - - less than three years after winning a general election majority of more than 160.

Leading academics, meanwhile, warned that even with higher fees universities will still be able to raise only a fraction of the cash they need.

Income from fees, due to flow from 2006, will raise at most £1 billion a year extra. Universities are due next month to hand the Government a bill for nearly £10 million over the next three-year spending round.

Professor Michael Sterling, vice chancellor of Birmingham University and chairman of the Russell Group of elite universities, said: " Public funding has to increase."

The universities' worst fears are that variable fees could still be at risk.

Professor Sir Richard Sykes, Rector of Imperial College feared that some MPs had voted with the Government only so they could fight the Bill in its committee stages. He said: "There is still a long way to go. With a majority of five, that's pretty frightening."

Professor Sykes, who would like charge up to £20,000 a year for Imperial's courses, accepted fees will now be fixed until at least 2010.

But he said: "We have to preserve the financial flexibility the Bill would still give us, and make sure no more money is taken away."