After a sleepless 30 hours, Commons and Lords agree on the bouncing Bill

Tony Blair and Michael Howard brought Parliament's agony to an end almost 30 hours after the epic trial of strength began between the Commons and Lords.

Tony Blair and Michael Howard brought Parliament's agony to an end almost 30 hours after the epic trial of strength began between the Commons and Lords.

In the ornate surroundings of Downing Street's Pillared Room, decorated with portraits of women novelists, the Prime Minister held out an olive branch over the anti-terror laws. A quarter of a mile away, at the Tories' new headquarters in Victoria, Mr Howard gratefully accepted it, signalling a ceasefire in the war of attrition at Westminster.

But Mr Blair had been searching for a formula to break the deadlock since Thursday night when he was warned by a Cabinet colleague: "There has to be a plan C." Despite the apparently entrenched position of the warring parties, his advisers also believed there remained room for manoeuvre.

After he returned from a press conference to launch his Commission for Africa report, he thrashed out with senior colleagues how much ground could be ceded to secure the Prevention of Terrorism Bill.

They settled on offering a chance to review the legislation in 12 months without conceding the so-called "sunset clause" that would terminate the legislation next year. Downing Street also calculated that the timing of the move - on the day eight foreign terrorist suspects were released and on the first anniversary of the Madrid bombings - would mean it would not be interpreted as bowing to Tory or Liberal Democrat pressure.

The move did the trick, with Government and the two main opposition parties all claiming victory. David Maclean, the Tory chief whip, was loudly ordering champagne. Labour sources boasted they had offered the opposition a "trick of the light". And the Liberal Democrats insisted: "We have a sunset clause in all but name."

For all their complaints, most parliamentarians had revelled in the drama. As one elderly peer had remarked nostalgically, there had been the spirit of the Blitz about the Palace as the two Houses staged the longest game of parliamentary ping-pong in living memory. Fortified by coffee and toast, MPs and their elderly counterparts in the Upper House, grabbed a few hours' fitful sleep on makeshift beds as the cross-fire between the two chambers continued through the small hours.

"It looked like the London Underground in the Second World War," the peer said. "There were sleeping bodies everywhere." An aide to a minister in the Lords said: "I grabbed half an hour under a desk. Everywhere you looked there were peers crashed out."

Members of the Lords, including several octogenarians, were forced from their beds shortly before 5am yesterday to resume battle. There was no sign that the protracted conflict had sapped their energy, sending the Prevention of Terrorism Bill back to their elected counterparts. As peers gathered, Lord Goodhart, the Liberal Democrat who has been spearheading opposition to the Bill in the Lords, encountered Charles Clarke, the Home Secretary, stalking the corridors of the Palace. The burly Mr Clarke glared at his nemesis, and declared: "That was a terrible speech." The peer said: "I took it as a compliment."

With dawn breaking over the Thames, the parliamentary cleaners were confronted by chaotic scenes and were forced to vacuum around slumbering bodies, slumped on benches and armchairs in corridors, libraries and drinking dens around the Palace.

MPs and peers stumbled shell-shocked to their hearty fried breakfasts as Westminster's restaurants turned into all-night cafeterias fuelling the warring parties. The queue stretched from the Commons chamber to the Terrace Cafeteria, the MPs' haunt, before the House returned at 8am. In the Lords, service had been brisk in their dining-room through the small hours. Staff ran out of toast at one point as they struggled to cope with demand.

The all-night session brought gloom - and revived some bad memories of the Callaghan and Major governments' travails - for hundreds of Westminster staff. It also brought a cost to taxpayers in tens of thousands of pounds of overtime pay.

The doorkeepers who guard the entrance to the Commons chamber could only doze in armchairs because their sleeping accommodation vanished when MPs' hours were modernised two years ago.

Police worked double shifts, clerks in both Houses agonised over the fine details of procedure and Commons telephonists answered calls through the night. Yesterday morning, a dozen rubbish bags, filled with empty polystyrene coffee cups and takeaway food packs, were piled outside the wood-panelled offices of Hansard, whose staff toiled through the night recording the debates.

As dawn broke, the mood among Labour MPs became increasingly fractious. One left-winger said: "A lot are just dog-tired. Some are also fed up with loyally voting for things they don't really believe in."

To the alarm of a snoozing Labour backbencher, 100 Tories gathered in the Members' smoking room to toast the morning with bucks fizz.

The MPs put £5 each in a hat for Comic Relief and cheered their chief whip, David Maclean, told them: "We fight on, we fight to win." Bizarrely, these were the words used by Margaret Thatcher in her doomed attempt to hold on to her leadership in 1990.

There was another possible explanation for their good cheer as the Westminster tug-of-war meant they did not have to attend the Conservatives' spring forum in Brighton, which started yesterday afternoon. One shadow minister said: "We were supposed to be bonding in Brighton, but we're doing a lot more bonding here."

The Tories also sported Red Nose Day badges to mark what they dubbed "Charles Clarke red face day", a stunt which brought Labour charges that they were behaving like overgrown public schoolboys.

At lunch-time, after the Lords had returned the Bill for the fourth time in 24 hours, Mr Howard, who had summoned aides back from Brighton, cashed in on the mood by delivering a "no surrender" warning to ministers over the sunset clause. He told Tory MPs and peers, including Baroness Thatcher, crowded into the Moses Room in the House of Lords, that the Opposition would "stand firm" on the issue.

The Liberal Democrats, whose home affairs spokesman Mark Oaten had endured a sleepless night because of endless phone calls, were also upbeat, believing they had been instrumental in wringing concessions out of the Government.

As MPs started their fourth debate, news swept Westminster that Tony Blair was preparing an important statement in Downing Street. Furious Tories rose to complain that he should be speaking to Parliament. But Mr Blair's words were delayed nearly an hour because of a problem with the TV cameras. For many opposition MPs yesterday, that said it all.

WAR OF WORDS

TONY BLAIR

"Over the past 48 hours I have been accused of many things but I want to say I have simply been trying to do one thing. And that is to give our police and those who look after the safety and security of our country, our citizens, our families, the powers they need to protect us from those who threaten us with terrorism.

"They [the Tories] should come to their senses, drop this opposition and let us get on with the business of protecting the people of this country. This is our best attempt to get this legislation on the statute book. There are going to be no further pushes. We have done our best to find a way through."

MICHAEL HOWARD

"This has been a good day for Britain and a bad day for Mr Blair. The Prime Minister has been forced to announce a sunset clause in all but name. Our bottom line has always been the sunset clause. That is what we have now been given. Everyone agrees that terrorism is a real threat to our country - the point of difference has always been how we most effectively tackle it.

"Mr Blair has only himself to blame for the mess he finds himself in. Throughout this sorry saga he has consistently refused to listen to Parliament and to common sense - arrogantly asserting that he is the only person willing to fight terrorism."