Clause 18 of the Teaching and Higher Education Bill gives the Education Secretary the power to withdraw funding from universities that introduce top-up fees, but this is seen by the powerful higher education lobby as jeopardising academic independence.

The potential defeat follows hard on the heels of an attack by the Bishop of Ripon on the Bill’s proposed General Teaching Council, because of its limited powers. During the report stage of the Bill, which establishes the council and new loan arrangements for students, the bishop said he doubted sufficient people of high calibre will be attracted to serve on the GTC unless it had a more substantial role to play.

The Government resisted attempts by opposition peers to strengthen the role of the council. A Liberal Democrat amendment called for it to give advice on the quality of learning in schools, the promotion and recruitment of teachers, standards of conduct and grounds of dismissal of teachers and the funding of the education service.

Baroness Blackstone, the higher education minister, said the council would be an advisory body but should not duplicate the roles of the Qualifications and Curriculum Authority or the Teacher Training Agency. She said the GTC would be an evolutionary body and said the step-by-step approach won favour with Doug McAvoy, general secretary of the largest teachers’ union, the National Union of Teachers.

Lord Pilkington (Con) said it would be evolution at a dinosaur’s pace, as any changes to the council’s powers or functions would need further legislation, which would probably not happen until the next Parliament. He said if teachers were forced to subscribe to the GTC they should have powers to control who was on the register.

A Government amendment which said the council’s principal aims will be to contribute to the raising of standards and improve standards of professional conduct among teachers was passed.

Earlier in the session, the Government survived an attempt to delay the passage of the Bill by agreeing to give more time to its report stage. Lord Tope, Liberal Democrat, withdrew an an amendment, which had support from the Conservatives, to bring back two clauses dealing with student loans for debate after receiving a letter from Baroness Blackstone.

She had assured him the report stage would be extended to two-and-a-half days and said procedures would be “relaxed” so questions and interjections would be taken.

Lady Blatch, leading for the Tories, was scathing: “Mr Ashdown has been told by Mr Blair to capitulate,” she said. She said the education minister’s concessions showed she accepted more time was needed to consider the Bill. Lord Renfrew (Con) said he regretted Lord Tope’s decision as the Bill’s ‘nebulous yet sweeping powers’ made it difficult to make amendments.

Lord Russell (Liberal Democrat) also said he was disappointed by his own party’s action. As professor of British history at King’s College, London University, he said he would be clearing up the mess the Bill would create long after ministers and other noble Lords had moved on to other things.