As thousands of protesters effectively laid siege to the gates of Parliament, MPs today voted by 323 to 302 to back the measure following a five-hour debate.
The new fee cap – which is still subject to a vote in the House of Lords next week – will enable universities to charge undergraduate tuition fees of up to £9,000 from 2012-13. However, there will also be a “soft cap” of £6,000, above which institutions must sign up to agreements on widening access.
Despite the proposals being passed, the result indicated that a large number of Liberal Democrat MPs voted against the government, breaking the coalition agreement with the Conservatives that they would abstain if they could not vote for the plans.
A number of Tory MPs had also pledged to vote against the motion, including former leadership candidate David Davis.
Among the Lib Dems who were planning to rebel were former Lib Dem leaders Sir Menzies Campbell and Charles Kennedy, and party president Tim Farron. The deputy leader Simon Hughes said he would either abstain or vote against.
The deputy prime minister Nick Clegg secured the support of all 17 Lib Dem ministers, but at least one Parliamenty Private Secretary, Mike Crockart, resigned in order to oppose the proposals.
The vote has opened up deep rifts in the party, after most Lib Dem MPs signed a National Union of Students pledge before the general election to oppose a fees rise.
Vince Cable, the Lib Dem business secretary, who signed the pledge, faced cries of “shame” in the Commons as he commended the proposals, which he said were more progressive than the current system.
Watched by prime minister David Cameron and Mr Clegg –both of whom left the debate shortly afterward – Mr Cable said alternative options to cut student numbers or to starve the sector of funding from any source were “unacceptable” and he was “proud” of the measures being put forward.
But John Denham, the Labour shadow business secretary, said the government’s policy was the “most profound” change in university funding since the 1920s and would introduce an “untried, untested and unstable” market into the system.
He cited evidence from the Higher Education Policy Institute and others that the plans could cost taxpayers more in the long run because of the vast amount of money needed to prop up the loans system.
Both Mr Denham and Mr Cable cited analysis from the Institute for Fiscal Studies (IFS) to back up their respective cases. The analysis stated that the proposals were “more progressive” than the current system, but also that graduates from the poorest 30 per cent of households will end up paying more.
Meanwhile, Gareth Thomas, the Labour shadow universities minister, pointed out that the IFS had also cast doubts over the government’s proposed National Scholarship Scheme by warning it could generate incentives for universities to turn away students from poorer backgrounds.
As the debate carried on inside the Commons, masses of students, lecturers and other activists outside were confronted by lines of police in riot gear and on horseback.
The stand-off was punctuated by repeated scuffles as protesters tried to break through from Parliament Square. Some threw bottles and placards.
Inside the Commons a small number of protesters were removed from the public gallery during the debate, and the Parliament Square demonstration could be heard from inside the chamber.
10 December Update
Demonstrators clashed with police in London last night as protests against the rise in tuition fees ended in violence.
Protesters smashed windows at the Treasury and police fought back crowds using batons.
Fires were started in Trafalgar Square, and a student was left unconscious with bleeding on the brain after allegedly being struck by a police officer.
Meanwhile, on Regent Street, protestors smashed the window of a car carrying Prince Charles and the Duchess of Cornwall to the Royal Variety Performance, and shop windows were shattered in Oxford Street.
Police were expecting around 20,000 people to attend the protests.
More than 1,000 university and college students who had gathered in Parliament Square were kettled by police from around 5pm until 11.30pm.