A group of Islamist militants today released unharmed some 250 children and teachers they had been holding hostage at a school in troubled northwest Pakistan after a tense stand-off with security forces.

The seven gunmen gave themselves up to a delegation of tribal negotiators, Interior Ministry spokesman Javed Iqbal Cheema said. Earlier Hamid Nawaz, the Interior Minister said that the militants, who he described as terrorists, had been demanding safe passage after fleeing police in the neighbouring district of Karak.

Asked if the government had acceded to their demands, Mr Cheema said “They are still with the jirga and it is now between the jirga and local police."

State television said the government had agreed to allow them to walk free in exchange for the release of the pupils, aged between eight and 12.

The incident came as President Pervez Musharraf was in London for talks with Gordon Brown, amid increasing fears for the stability of Pakistan ahead of elections on February 18.

He welcomed news of the children’s release, telling a Downing Street press conference that the siege was a “desperate act” aimed at disrupting the democratic process. However Pakistan would have a transition to a strong democratic government, he insisted.

Local police said that the militants had sought refuge in the school, in Wali Dar village near Bannu, after abducting Karak’s health chief. Officers gave chase and in the ensuing shoot-out at two fighters were killed and a policeman was injured, while the official managed to escape, an intelligence source said, speaking on condition of anonymity.

District police chief Dar Ali Khattak said the militants had “all types of weapons like rocket launchers and grenades.”

The North West Frontier Province, a lawless region bordering Afghanistan, has been the scene of fierce battles between militants and security forces in recent months, with renewed violence erupting on Friday.

Backed by gunships, security forces clashed with militants who had blocked the Indus Highway, a crucial north-south road, and seized the Kohat tunnel, a key mountain pass close to the main northwestern city of Peshawar which leads to the volatile tribal belt.

The army said in a statement yesterday that security forces had wrested back control of the tunnel after “fierce fighting" that left 24 militants dead, while many others retreated leaving their weapons and ammunition behind.

This morning, government troops supported by tanks and helicopters were advancing into the outskirts of nearby Dara Adem Khel, an Islamist stronghold where 30 militants and two paramilitary troopers were killed in a bloody confrontation on Friday. Hundreds of residents fled their homes, piling into trucks and carts bound for Peshawar, the provincial capital.

There, supporters of Jamat-e-Islami, an Islamist opposition party, marched through the streets in protest at military action in Pakistan's tribal areas. Demonstrators chanted furious slogans and waved banners demanding: "Stop all military operations including in Dara Adem Khel."

Militants have been recently stepping up their activities in the region, where Islamist parties have effectively ruled for the past five years and where pro-Taleban sentiment is strong. However the growing incidence of attacks on businesses deemed un-Islamic, such as video shops and TV stores, has eroded some of that support.

Government troops also engaged with militants in South Waziristan today, a rugged tribal region 90 miles southwest of Dara Adam Khel. The army reported that one soldier died and nine others were wounded in heavy fighting in the area, the stronghold of an Al-Qaeda-linked militant accused of involvement in the assassination of Benazir Bhutto.

President Musharraf suggested that the school siege may have been intended “to take away any attention from the military operation outside,” while Mr Brown described it as a “abhorrent” act which “reminds us of the continuous threat from terrorists.”

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