The government is reported to be deadlocked over plans to overhaul the way universities are funded, following the leak of proposals to allow universities to increase tuition fees.

The cabinet is said to be split on the question of allowing different universities to charge different fees.

One senior Labour MP says there is a "battle royal" raging in Downing Street.

And another has called on Tony Blair to "bang heads together" to get agreement on plans to reform higher educatiuon funding.

However, Downing Street is playing down talk of a split.

The Prime Minister's official spokesman says proposals will come out as planned next week and that only "fine-tuning" is going on.

Universities have a cash shortfall

Under the proposals, leaked to the BBC on Thursday, universities would be allowed to charge tuition fees of �3,000 or �4,000 a year.

But these would be paid by students after they graduated, not before.

At the moment, students are eligible to pay tuition fees of �1,100 a year up-front.

In practice only about half of students pay the full amount, because of means-testing.

Reports suggest the Prime Minister and Education Secretary Charles Clarke are in favour of the scheme.

If the deal comes out...there could be uproar. Ian Gibson, Labour MP

They are said to be pitted against the Chancellor Gordon Brown, Deputy Prime Minister John Prescott and former education secretary David Blunkett.

The opponents of the plans warn they could deter students from poorer families from going to university.

Many Labour MPs are also said to be unhappy about the idea of what they see as elite universities being able to charge more for courses.

Battle royal

Labour MP Ian Gibson, who is chairman of the science and technology select committee, says there is a power struggle underway.

"I am sure there is a battle royal going on between the different interest groups now in Downing Street," he said.

Mr Gibson, speaking on the Today programme on BBC Radio Four, warns the proposals could lead to a large-scale rebellion if they are put forward in a white paper due to be published next week.

I have been astounded by what seems to be a real altercation Barry Sheerman, Labour

"If the deal comes out next week proposing that there's going to be some kind of differential fees between the so-called elite universities and the others, I think there could be an uproar about it."

Barry Sheerman, the chairman of the Commons education select committee, says he is dismayed that the different camps had apparently briefed newspapers about the plans.

"I was anticipating a really visionary, excellent white paper to come out early next week, which would set universities on the course of much more independence and growth over the next 20 years," said Mr Sheerman.

"I have been astounded by what seems to be a real altercation, if not a row, going on somewhere between Number 10, the Treasury and cabinet or elsewhere on deciding what to put out and when."

Bang heads

He said he thought the details of the plans leaked to the BBC on Thursday were "not a bad balance".

"I hope the prime minister will come in and bang a few heads together and say: 'Come on, this is one of the most significant strategy documents of the two Labour administrations'," he said.

Mr Clarke's package includes the return of maintenance grants for the very poorest.

And there would be "golden handcuffs" for people going into public sector work.

They would have their debts paid off if they stayed in their jobs.

Shadow education secretary Damian Green said working class families would still be deterred from applying to the best universities.

The old student grant may return

Liberal Democrat education spokesman Phil Willis described it as a "sell-out for Britain's students and our universities".

The repayment of fees would begin once earnings reached a certain level, perhaps �12,000.

But it is not clear how deferred payment would answer the pressing issue of university under-funding.

The Labour government introduced fees across the UK after the 1997 election.

The plans for England and Wales would mean a system similar to Scotland, where the executive pays the fees on behalf of Scottish students at Scottish universities.

Scottish graduates contribute �2,000 to a fund for hardship grants for poorer students, starting to pay this when their earnings are at least �10,000.