Universities have a moral obligation to bring more working-class students into higher education, Sir Ron Dearing has told the Government. And those with a track record of encouraging more mature students and people from poorer families and ethnic minorities should be rewarded with extra funding, he says.

That could mean more cash for newer universities - including those created in 1992 from the old polytechnics, many of which have taken on as their mission the need to widen access to higher education.

The Dearing inquiry, which reported on Wednesday, found 20 years of expansion and a doubling of student numbers had made comparatively little impact on the proportion of entrants coming from lower socio-economic backgrounds. Their numbers rose by less than five percentage points between 1985 and 1996, the inquiry found.

Yet there has been a big improvement in participation in other areas. Overall, the gender divide has disappeared - women students now make up a rightful 52 per cent - and the proportion of the ethnic minority population taking up higher education places is significantly higher than the take-up rate among whites. Some 30 per cent of students now start their degrees at 21 or older.

But inequalities remain, Dearing found. Women were still heavily biased towards arts and humanities courses and are outnumbered by men in computer studies by four to one. Working-class and Afro-Caribbean men, Bangladeshi women and students with disabilities are greatly under-represented.

Dearing has set as a benchmark for the next 20 years a staying-on rate of 45 per cent of the population, compared with 32 per cent now. But he said: “Higher education institutions have ... a moral obligation to concern themselves with continuing differences in levels of participation.”

His report said all universities should have in place a formal strategy for widening participation. And funding bodies should “give priority to those institutions which can demonstrate a commitment to widening participation. ”

Additional funding would go to bodies which are running “projects to address low expectations and achievement and promote progression to higher education”.

Sir Ron urged the extension of grants, social security benefits and other state help for part-time and mature students, many of whom currently receive no aid.

Professor Christine King, vice-chancellor of Staffordshire University and convener of the Coalition for Modern Universities, which represents the former polys, said these would be the first steps towards higher education that was really for all. “That is what the new universities are absolutely committed to,” she said. “Targeted money would make a lot of difference very quickly, provided it was built on to existing schemes.”

Staffordshire is one of a number of universities developing links with schools and FE colleges and setting up student mentor systems. The result is wider participation.

Former polys also have larger numbers of students who have not followed the traditional A-level route - 59 per cent of entrants in 1993 had A-levels compared to 84 per cent at the “old” universities. Sir Ron identified the widespread A-level requirement as one disincentive for working-class students and other under-represented groups.

But that, the inquiry report said, could lead to the creation of a two-tier system, where qualifications from some institutions were seen by employers as superior because of the A-level-laden intake.

The challenge will be to widen participation in the face of tuition fees and Labour’s plan to scrapmeans-tested grants which Dearing recommends should continue to pay half students’ living expenses.

Dearing found students from poorer backgrounds were already leaving university worse off than others. Debt has been identified as a key cause of dropping out, and more students are now working their way through university.

The National Union of Students said charging tuition fees was “a breach of principle” and that despite Government assurances that universities would be blocked from exceeding the Pounds 1,000-a-year fee, institutions such as Oxford and the London School of Economics would soon be charging more.

“It will have a particular impact on working-class students because they have a different attitude towards debt,” NUS president Douglas Trainer said. “It will be the end of mass higher education.”

But Professor King said she believed that after an initial fuss over Labour’s plans the long-term impact would be minimal, given that students already finish university in debt. It could even make students more demanding “customers”, taking a keener interest in the running of their institution.

“We will have a big job talking to careers teachers, parents and schools and explaining what the situation is,” she said. “People are scared because it sounds worse than it probably will be.”