Tony Blair has refused to rule out raising the maximum university tuition fee beyond the current £3,000 per year limit.
At his monthly press conference in Downing Street on Tuesday, the prime minister was asked whether the recent increase in applications to higher education institutions meant it was now safe to lift the cap.
The government pledged not to increase the maximum charge to undergraduates in the current parliament when introducing variable "top-up" fees in 2004.
But vice-chancellors are already pushing for the cap to be lifted in order to compete with international counterparts, a position Blair is thought to have sympathy with.
Blair told reporters: "There will be decisions taken about this in the time to come.
"The important thing undoubtedly is to take advantage of the fact that we have got a far better system of university finance that can allow our universities to remain in the forefront of university provision."
He said critics had been wrong to claim that fees would put students off applying for degree courses.
"For us and the university system the worries about tuition fees turned out to be misplaced," the prime minister pointed out.
"That's fine but we need to recognise that this is a global marketplace now in higher education."
Blair said North America, China and India would all provide competition for the UK's universities.
"We have got to keep up to the mark the whole time," he warned, adding that there is also a need to secure universities' future with endowment funds.
He also said the government needs to "apply the same type of public service reform" to skills training and further education provision.
