Britain is to expel two Iranian diplomats as a tit-for-tat response after Iran forced the same number of British diplomats to leave, Gordon Brown revealed this afternoon.

"It is with regret that I should inform the House that Iran yesterday took the unjustified step of expelling two British diplomats over allegations which are absolutely without foundation," Mr Brown told MPs.

"In response to that action, we informed the Iranian ambassador today that we would expel two Iranian diplomats from their embassy in London. I am disappointed that Iran has placed us in this position."

The Foreign Office revealed that the Iranians had accused the expelled British diplomats of "activities inconsistent with their diplomatic status", which is diplomatic code for spying. It said the allegations were baseless.

"We think the Government of Iran is seeking to blame the UK and other outsiders for what is an Iranian reaction to an Iranian issue," said a spokesman. “This has a potential impact on our staff safety and is unacceptable. We have taken the decision to reciprocate.”

The latest exchange of hostilities marks a further deterioration in relations between Iran and the West.

Ayatollah Ali Khamenei, Iran's Supreme Leader, and President Ahmadinejad have both accused Britain of interfering in Iran’s internal affairs to foment the public unrest which has broken out since Mr Ahmadinejad's disputed re-election on June 12.

The Iranian state media routinely refer to Britain as the "Little Satan", a "fox" and the "most treacherous" of the Western powers, and a report claims that British spies have been flooding into Iran in droves for up to two years.

The regime accuses western media outlets of parroting their government's line, and yesterday expelled the BBC's correspondent in Tehran.

Adding to the pressure, a large, government-orchestrated protest was arranged to take place outside the British embassy in Tehran today. It was then called off at the last minute, when the Interior Ministry said that the student protesters did not have a licence to demonstrate.

Mindful of the 444 day siege of the US embassy in Tehran by Iranian students during the revolution against the Shah in 1979, the Foreign Office was taking no chances and announced yesterday that the families of diplomats would be flown back to Britain. It also issued a travel alert warning Britons against all but essential travel to the Islamic republic.

As democracy protesters have taken to the streets of Iran's cities, a more discreet diplomatic struggle hs been played out in embassies and foreign ministries around the world.

France, Germany, Britain, Finland, Denmark, the Netherlands and the Czech Republic have all called in their Iranian ambassadors for a formal dressing down, to voice their fears that the presidential election was not fairly conducted, and their alarm at the ferocity at which Iran has been suppressing the protests.

Iran has responded in kind, calling in the British, Czech and Swiss ambassadors to express its own annoyance.

In the febrile atmosphere, Iranian news agencies reported this morning that Iran was recalling its ambassador to Britain, although the Iranian Foreign Ministry later denied this.

Iran's ambassadors abroad have been summoned by

France (twice), Sweden, Czech Republic (holders of EU presidency), Finland, The Netherlands, Denmark, Germany (twice), Britain, Belgium, Canada

Foreign ambassadors summoned by Tehran

Britain, Czech Republic, Switzerland (who also represents US interests in Tehran)

Countries which have accepted Mahmoud Ahmadinejad's election victory

Venezuela, Iraq, Afghanistan, Russia, China

Foreign embassies in Tehran willing to offer sanctuary to protesters

Italy, Austria

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