Fears were growing yesterday that higher education in Scotland could become a two-tier system after the adoption of controversial proposals to focus widening access on a few new universities rather than the ancient institutions.

The warning came after the Scottish Funding Council (SFC) announced plans to allocate a £3m fund for widening participation to universities which traditionally recruit more students from low participation backgrounds.

Institutions to benefit include Glasgow Caledonian, Napier, Queen Margaret, Robert Gordon, Abertay, West of Scotland and the Open University.

The money is to be used to expand the work these institutions already do to encourage students with ability, but not the required Highers, to use vocational HND and HNC qualifications to develop their skills at college before "articulating" into the second year of a university degree course.

While the aims of the initiative have been welcomed, concerns were raised because institutions such as Aberdeen, Glasgow, Edinburgh and St Andrews will not receive this funding and will not be expected to expand articulation in the same way.

Professor John Field, an expert in lifelong learning from Stirling University, warned it risked creating a two-tier system: "It is a conservative approach with a tried and tested system, but the weakness is that it amounts to educational segregation."

James Alexander, president of NUS Scotland, said: "It is important to widen participation through articulation, but this has to be a short-term strategy because in the long-term we want to ensure articulation is available to all universities otherwise this will simply entrench the two-tier system in Scotland."

However, the SFC defended the proposals and stressed that articulation was just one strand of a much wider agenda to widen access to low participation groups. All universities currently run widening access programmes.

Roger McClure, chief executive of the council, said: "We are going to target funding selectively to those higher education institutions who are doing the most of this work and for whom it is a significant part of their business. That does not mean that somehow the elite universities are not expected to do anything."

The row over articulation came as the SFC announced a £555m funding settlement for the further education sector for 2008-09. The package for Scotland's 43 colleges includes teaching grants worth more than £512m.

The sector will receive a £19m increase in funding for learning and teaching compared with 2007-08.

This provides for inflation at 2.7% and represents a 4% increase.

All colleges will receive an increase in funding, though some will receive a below-inflation rise based on changes in their student population.

In addition, the SFC has announced that further education colleges will be able to provide increased bursaries to students who need help with living and study costs through a grant of £72m.

And a £3m funding package was also unveiled to fund additional places in colleges in the West Highlands, Central and the South of Scotland, where participation is lowest.

John McClelland, chairman of the SFC, said: "The council is pleased to be announcing increased funding for the college sector for 2008-09."

However, the Association of Scotland's Colleges warned the increases in funding were not sufficient to meet the current expectations of the sector.

Sue Pinder, convenor of the association's principals' forum, said: "Scotland's colleges understand that we are operating within times of tighter public sector spending, and within that context we are pleased with this year's settlement.

"There are, however, areas of concern for us; as our remit continues to expand, we are expected to address an increasing number of government priorities and to have relatively small sums of money allocated towards many of these areas does pose a challenge. We will be seeking to meet with the government as soon as possible."