Mandelson heads top-up fee 'unit'

Peter Mandelson, the Prime Minister's unofficial adviser, has set up a Downing Street "war room" to help steer legislation on student fees through Parliament.

The proposal to allow elite universities to charge higher fees on selected courses is set to be the hottest item of the parliamentary year.

The National Union of Students has forecast that central London will be brought to a "standstill" today, as thousands of students take to the streets in protest. The march is backed by a huge cross-section of political opinion, ranging from the far left to the Tories' shadow education secretary, Damian Green.

Tony Blair's own advisers have calculated that at present they have the support of only about 100 backbench Labour MPs, making it highly possible that the legislation will fail to get through the Commons.

To meet the crisis, Mr Mandelson is establishing a war room similar to the one set up to plan the 1997 election. But his return as the Prime Minister's political adviser has provoked mixed feelings in governmentcircles, where he has as many enemies as admirers. One Whitehall source said: "The only thing more unpopular among Labour MPs than top-up fees is Peter Mandelson."

Opponents of the fees fear that bright students from lower-income families will be deterred from taking up places at top universities for fear of getting into debt. But with universities saying that they have been under-funded for years, Mr Blair has ruled out making up the difference from taxes, saying that graduates will have to pay more.

Charles Clarke, the Education Secretary, has been meeting Labour MPs to try to convince them that the plans will help poor students to go through university.

He is proposing that no students will have to pay tuition fees until after graduation, and that there will be aid for students whose family income is below £31,000 a year. Students on half that amount should pay no tuition fees at all.

Despite these concessions, Mr Blair is under pressure to scrap the idea.

Mandy Telford, president of the National Union of Students, claimed: "It doesn't matter how top-up fees are dressed up. The simple truth remains that, by allowing universities to charge higher fees, the Government will price thousands of talented students out of university."

Headteachers will be told on Wednesday about rules created to avoid another crisis like this year's, when teachers were laid off and schools used up their reserves. Mr Clarke will announce a new formula which will mean that every school is guaranteed a minimum percentage increase in its budget, based on the number of pupils.

The announcement may anger some councillors, who fear an increase in central government control over how schools are funded. Mr Clarke will sugar the pill by promising that the minimum guarantee will take up only a fraction of the budget, allowing education authorities to decide how to spend the rest.