Charles Clarke has unveiled plans for the new higher education access regulator and warned universities they will have to accept more working class students.

The education secretary announced that the watchdog will be known as the Office for Fair Access (OFFA).

Clarke stressed that OFFA would not impose targets for social inclusion within higher education, but would be "rigorous" in promoting wider access to the best institutions.

The watchdog would hold to account those universities being given freedom to raise tuition fees from £1100 to a maximum of £3000 per year.

The head of the office, yet to be appointed, will draw up access agreements with vice-chancellors before higher fees are authorised.

These agreements will focus on "outreach work" to be undertaken by universities with schools to raise the number of applications from poorer students.

The agreements will also detail plans for bursaries and financial support and outline the milestones and indicators universities will use to measure their success in widening participation.

Failure to agree an admissions policy with OFFA will cost colleges the ability to raise funds through extra fees.

Clarke insisted this power was a "pretty tough sanction" which would force academics to take the issue seriously.

Despite earlier suggestions from higher education minister Margaret Hodge, OFFA will not impose targets or penalties on the admissions process once the agreements have been signed.

Universities and independent schools have fought a fierce rearguard action against the powers of the regulator since the government's white paper was published in January.

The idea of an access watchdog was included to appease critics of the £3000 "top-up" fees.

They fear a two-tier system of higher education - with elite universities charging high fees - will be created as a result of the move.

Bristol University has recently come under fire for its admissions procedures, which are said to discriminate against candidates from independent schools with good A Level grades in order to achieve a socially balanced intake of students.

The media storm forced ministers to insist that their plans would not compromise selection on the basis of academic merit.

This has shifted the focus of OFFA's work from enforcing greater working class access through selection to encouraging outreach projects and increasing applications from "non-traditional" backgrounds.

Clarke said the thrust of his plan was to "achieve a fair chance for children from every background to go to university on the basis of merit".

"The focus of what we have to attack is the massive difference that there is in the applications to different universities from different people from different backgrounds," he said.

"What we will do is encourage the students from the poorer backgrounds to apply to the best universities, and all the evidence is...that many, many well-qualified, talented students don't apply to our best universities that we have to change.

"The reason why they don't apply is because many universities send out messages that 'You're not wanted here'.

"What we are not going down the line of is publishing a national target where we sit in an office here in Whitehall and say 'OK you get x per cent, you get y per cent, and you've got to live up to that'."

The National Union of Students welcomed the broad approach to access that OFFA will pursue.

But NUS president Mandy Telford said the watchdog's powers would pale in comparison to the effect higher fees would have on working class access.

"We are delighted that universities will now employ a wide range of measures to ensure they are getting the very best students on the courses best suited to them," she said

"However instead of introducing real measures to address the problem of student hardship it has come up with a set of measures that will leave poorer students £900 a year worse off and is forcing universities to jump through hoops if they want to see any of that extra cash."