How Blair won the university battle

As the Prime Minister put the finishing touches to his speech to the Labour Party conference in 2001, he decided at the last moment to include a pledge to review the funding of higher education.

Education ministers, who had not been tipped off about this commitment, gulped when Tony Blair declared to the conference delegates: "We have to find a better way to combine state funding and student contributions."

Mr Blair had been struck by the "feeling on the doorstep" during the general election campaign that had recently taken place. The Labour Party was being given a hard time over the decision that it had taken in 1997 to impose tuition fees, and it was anxious that fear of debt was deterring many working-class students from going to university.

The review that Tony Blair's conference speech had initiated was originally due to be completed by the end of 2001, but the deadline was repeatedly extended as the three protagonists ­ the Department for Education and Skills, the Treasury and Downing Street ­ failed to find a formula that was acceptable to all of them.

When the review began, there were hopes that tuition fees would be abolished. In the event, it reopened the controversial option of allowing universities to charge students top-up fees ­ an option that David Blunkett, the then Secretary of State for Education, thought he had killed off by securing a pledge in Labour's 2001 manifesto that they would not be introduced.

The Prime Minister was converted to the idea of top-up fees by Andrew Adonis, the head of the Downing Street Policy Unit, and leading university vice-chancellors, including the late Lord Jenkins of Hillhead, the Chancellor of Oxford University.

The Prime Minister's determination to go ahead was a big factor in the surprise decision taken by Estelle Morris, Mr Blunkett's successor as Secretary of State for Education, to resign last October. "She didn't have the muscle to stop it," said one insider.

Charles Clarke, the new Secretary of State for Education, was not an instinctive supporter of top-up fees, but he worked with Downing Street to produce a package he could "sell" to hostile Labour backbenchers and Middle England.

Mr Clarke's strategy was blown off course last week when Gordon Brown threw a spanner into the works at the last minute by trying to keep open the option of a graduate tax, which he argued was fairer. He was accused of "posturing" by Blairites.

Mr Blair supported Mr Clarke. But one Labour critic of the scheme said: "It wasn't a case of Tony Blair backing Charles Clarke's plan; it was a case of Charles Clarke backing Tony Blair's plan."

The review has added further tension to the already strained relationship between Mr Blair and Mr Brown, who had a similar clash over foundation hospitals last autumn.

Mr Brown, who insists there are limits to the role of market forces in public services, has suffered a rare defeat on domestic policy. Today Mr Blair will challenge his Chancellor's caution by saying in a London speech on public services: "Our reform is the route to social justice and we need to go further and faster. We need more reform, not less."