The House of Commons approved a government amendment which ended the struggle with the Lords over proposals to impose fourth-year fees on non-Scottish UK students while exempting Scottish and other European Union students.

The Teaching and Higher Education Bill, which also provides for the abolition of student maintenance grants and sets up a General Teaching Council to regulate the teaching profession, now goes for Royal Assent to become law.

The amendment, which was backed by MPs without a vote, incorporates into the legislation Monday's promise by the Education Secretary, David Blunkett, to review the operation of the differential fees.

If the constitutional clash had not ended, the Bill could have been lost for this parliamentary session, delaying the introduction of higher education funding reforms and throwing university budgets into chaos.

Students will face a means test

The legislation provides for student fees of �1,000 a year, but the 30% of least well-off students would pay nothing while a further third would only pay part of the fees.

The Junior Education Minister, Dr Kim Howells, told the Commons that the government hoped the review would begin early next year.

"It will be a serious review," he said. "We believe it offers a way forward from the impasse we were facing in the House of Lords."

The Shadow Education Secretary, David Willetts, welcomed confirmation of the review in the Bill, but demanded clarification of the composition and powers of the review body.

"If the evidence shows that this Scottish anomaly is having an effect on the way student applications are going, we believe ministers will have a clear moral duty to act," he said.

The Labour MP for Linlithgow, Tam Dalyell, a critic of the fees differential, said Dundee University had suffered a 14% fall in applications.

The fourth-year fees being imposed on English, Welsh and Northern Irish students at Scottish universities were "a matter of considerable urgency that should be sorted out", he said.

For the Liberal Democrats, Phil Willis welcomed the government move but said it did not go far enough.

Criticising the handling of the row by the Scottish Education Minister, Brian Wilson, he said: "I believe that this whole battle was rather unnecessary.

"If Mr Wilson had not taken such an aggressive stance, the matter could have been settled some considerable time ago."