Education minister Baroness Blackstone yesterday caved in under intense pressure and announced that gap-year students would not be charged fees when they enter university next year.

The spectacular climbdown means all those who received an offer of a deferred place at university by the beginning of this month will enjoy three years’ free tuition and student grants next year. Those who apply next year, however, will have to pay.

Student leaders condemned the compromise, and called for all applicants to be treated equally next year.

As late as Tuesday, ministers were insisting that tuition fees would be introduced from October 1998. Only gap-year students who undertook three months’ voluntary work would be exempt.

Baroness Blackstone had accused Universities and Colleges Admissions Service chief executive Tony Higgins of “irresponsible scaremongering”. But this week she said fairness was her watchword, and claimed ministers “had always intended to consider the position of gap-year students at the time of the A-level results”.

She said: “After careful consideration I have decided that students who have an agreed firm or conditional deferred entry place for 1998 - taking a gap year in 1997 - will be treated as if they are entering higher education in 1997. The Government recognises the numerous advantages that taking a year out can bring.”

The announcement will affect 19,000 students who already hold a deferred place. Those who reapply to university next year will not be exempt from fees, raising the prospect of some people abandoning the idea of re-takes and swelling the numbers in clearing.

Students entering fundation-year courses for a 1998 start at univeristy will also fall through the net.

NUS president Douglas Trainer said: “This is completely unfair. We are calling on the Government to treat all 1998 students in the same way. We want the Government to take a year out itself and consider the situation and introduce tuition fees at another stage.”

A spokeswoman for the Department of Education and Employment claimed the cost of the concession would be small and would be met from existing budgets. But she was unable to say what fees would be charged and what grants would be available to students who apply for a university place next year when the new funding regime is phased in.

David Hart, the general secretary of the National Association of Head Teachers, said he was delighted. He said: “While this undoubtedly represents a complete U-turn it is nevertheless the only fair and reasonable solution to a problem largely of the Government’s own making.”

The chain of events which led to the biggest university entrance upset in years began at 3.30 pm on July 23, when Education and Employment Secretary David Blunkett outlined to MPs the most significant change in higher education funding for 30 years.

Cries of derision came from some backbench Labour MPs at the plan to abolish student grants and charge university tuition fees of Pounds 1,000 a year to the children of the better off.

The political decision to end free university education for all was said to have been one of the most difficult of Mr Blunkett’s career.

But within hours of his Commons announcement, the devil had emerged from the detail.

The new fees and loans would be phased in from October 1998, according to a leaflet produced by the Department for Education and Employment, but officials were unable to say how the scheme would be introduced, and what next year’s students could expect.

By that evening Tony Higgins, the chief executive of the Universities and Colleges Admissions Service, had warned The TES about a possible “insane scramble” for places if the tens of thousands of students expected to defer entry abandoned their gap year and searched for one of the last free university places.

Ministers tried to play down the problem in the days after it was first raised by The TES. Departmental sources told one newspaper that Mr Higgins was “talking through his hat”.