PLANS for universities to charge fees of up to £3,000 a year cleared their biggest hurdle last night after a rebellion by Labour MPs fizzled out.

Tony Blair's 161 majority was cut to 28 as 55 backbenchers voted against variable fees, but they failed to prevent the Higher Education Bill clearing the Commons unchanged.

The revolt was far smaller than when the Bill was first debated in January.

On that occasion, the Prime Minister's majority was only five, the smallest of his premiership.

Last night, the rebels joined forces with opposition parties to vote to peg fees at their current level of £1,125 - preventing different charges at different universities. They included City of Durham MP Gerry Steinberg.

Kevan Jones, MP for Durham North - who, in January, only backed the Bill "holding his nose" - again supported the Government.

Ministers had threatened to withdraw the whole package if the amendment was passed, including the scrapping of upfront fees and grants for poorer students.

Mr Blair told MPs that higher fees were "absolutely vital" to tackle chronic underfunding at universities and open their doors to more poorer students.

And Education Secretary Charles Clarke raised the heat on the rebels by accusing them of "conspiring and plotting" with the Tories.

However, the atmosphere at Westminster was markedly more relaxed than two months ago, when there was fevered speculation that Mr Blair could resign if defeated.

Ian Gibson, the Labour backbencher who tabled the amendment, warned that variable fees would produce a "divided and divisive university system", with leading institutions charging more.

But Downing Street won over many potential rebels in January, when it guaranteed that the higher fees - to start in 2006 - could not rise above £3,000 before 2010 without fresh legislation.

Last night, ministers agreed to a further demand that any increase after 2010 could only come after a full debate, rather than a simple vote, in Parliament.

About 1,000 students staged a demonstration against fees outside Parliament as MPs debated, tying hundreds of "price tags" to the railings indicating the size of their debts.

Liberal Democrat leader Charles Kennedy said the prospect of large debts would deter young people and insisted extra funding should come from a higher top rate of income tax.

Tim Yeo, Tory education spokesman, said: "It burdens the next generation of students with huge debts which will make it difficult to get mortgages and to make a start in life."

Tony Axon, Northern spokesman for lecturers' union the Association of University Teachers, said: "We're disappointed that MPs have decided not to rebel against this. We don't see top-up fees as a way of solving the problems in higher education."

The House of Lords has still to consider the Bill, but the Government is privately confident that peers will swing behind the legislation.