The Teaching and Higher Education Bill, defeated twice at report stage in the House of Lords on Monday, faces a fresh reverse next Tuesday when it goes to a final third reading.
Baroness Blatch, Conservative education spokesman in the Lords, said she would support the Liberal Democrats on an amendment to ensure that all money raised from tuition fees went into higher education. If the two opposition parties combine at anything near full strength like this week, the government is likely to lose.
On Monday the government was defeated by 45 votes on a Conservative resolution calling for students from the rest of the United Kingdom reading for Scottish degrees to be exempted from fourth-year fees in line with Scottish and other European students.
The other government defeat was on a Conservative amendment retaining maintenance grants, carried by 143 votes to 102.
Liberal Democrats hope to launch a further attack on the government's policy on tuition fees at third reading. An amendment that would have required the introduction of a government grant to match tuition fees, effectively negating government plans, fell by only 14 votes on the final day of the report stage. Amendments may be laid up until Monday.
The Lords will not be able to renew their challenge to clause 18, which gives the education secretary power to stop universities charging top-up fees. A move to delete it failed by ten votes.
Relations between opposition parties continued to be tense following Conservative anger last week at the late Liberal Democrat withdrawal of their motion to recommit the bill.
While 31 Conservative peers backed the anti-fees amendment, the front bench did not support it. Phil Willis, Liberal Democrat higher education spokesman, accused the Conservative front bench of "sitting on their hands when the opportunity to defeat the government came up". Liberal Democrat peer Lord Russell admitted that "trust had been diminished" by the events of the previous week.
Baroness Blatch said at report stage that the Conservatives might review their position if there was no change in the overall bill package. But the victory on grants, which if implemented would create a funding system close to that recommended by the Dearing report, means that they will not back the Liberal Democrats.
Five Labour peers - the former education secretary Lord Glenamara, Baroness Jeger and Lords Stallard, Stoddart and Sefton - voted against the government on tuition fees. Academic peers voted largely in accordance with party whips. Among cross-benchers Baroness Warnock voted with the government on tuition fees and grant, against on Scottish fees over clause 18, while Lord Quirk backed the government on grants. The Bishop of Lichfield was one of the few peers to vote against the government on all four divisions.
The government promised to reverse the defeats in the Commons. It said that the commitment to "a fair loans system" was a manifesto commitment. Labour backbencher Ken Livingstone warned that a vote to reverse the defeats "could be a close run thing".
The earliest the bill can start its progress through the Commons is the last week in March.
* In a clash at parliamentary question time on Wednesday prime minister Tony Blair said the government would not accept the Lords amendments.