"Access to top universities has been a touchy issue since UK chancellor Gordon Brown criticised the "old-school network" that denied bright children from poorer backgrounds places at Oxford or Cambridge.

But for Martin Stephen, high master of Manchester Grammar School, the issue is an old one. "We are an access scheme - up and running for 500 years - but we are being ignored," he says.

With the election out of the way, many people are hoping for change. A scheme has been put forward by the Independent Schools Council that will form the centre of a debate that could eventually affect thousands of children from less well-off backgrounds.

Stephen's problem is that the Assisted Places Scheme, introduced by Margaret Thatcher in 1979, has been abolished by Labour. At the height of the scheme 40,000 bright children received state finance to take up places at independent schools.

However, by January this year that figure was down to 19,000, and by 2004 it will be virtually nothing as the last of the 11-year-olds finish their progress towards university. Labour scrapped the scheme on principle (it was one of its highest-profile promises of the 1997 election) to help pay for free nursery places.

In fact, the APS replaced another scheme - the Direct Grant system - abolished in the mid-1970s, also by Labour. Many head teachers in the independent sector believed direct grants were far better than the APS. The older system enabled state pupils to attend about 150 independent schools - many of them the Tudor foundation grammar schools, of which Manchester, founded in 1515, was one.

"It was a classic public-private mix and its bedrock was the idea that a genuine meritocracy was the aim," said Stephen. "This was the best access scheme this country has ever had."

However, its replacement, the APS, was seen as having several serious flaws.

At its height the scheme financed 40 boys at Manchester out of its annual intake of 200 11-year-olds. Unusually, perhaps, the school did not look upon the scheme as a financial lifejacket. Stephen says he could easily have filled the 40 places with full fee-paying applicants from the "middle classes".

But critics said the scheme buoyed up the finances of private schools without benefiting the state sector. Some schools in the APS were also seen as not being good enough. "You can't put money into independent schools which are not better than most state schools," said Stephen. "The rationale is that they are centres of excellence."

But the main problem was that people were seen as breaking the rules. "It was taken as a political football and hoisted around. But the percentage of people fiddling the books was minute," said Stephen. Even so, the means test for the system ignored property and overall "household" income, which was seen as allowing people with clever accountants to jump the queues and secure places intended for the poor.

The APS was - as a result - politically frail and was swept away by Labour. This caused schools such as Manchester Grammar big problems as its philosophy was one day to offer places to all those who passed its special entrance test regardless of whether they could pay the fees. As a result an attempt is being made to re-found the school with a £25m fund. So far, £7m of a medium-term target of £10m has been raised.

The school can now finance 30 to 35 places - with a target of raising that to 50. Half of this entry is from state primary schools.

The school's academic performance is glittering - it is usually in the top 10 for GCSEs and each year 40 to 60 pupils go on to Oxbridge, while 85 per cent obtain A or B grades at A-level, and have done so for the past three years.

But Stephen said the school could perform better if the APS, and Manchester's own replacement scheme, did not exist. "In terms of results and standards judged by league tables, we are probably doing ourselves [down] by our commitment to the APS philosophy."

This is because entrants from poor backgrounds have not been through the strict academic schooling necessary to score well at A-levels and secure a top university place. "We are taking a huge gamble. They are not a tried and tested commodity. They are a risk - a wonderful risk," said Stephen.

But such risks are less and less common as the APS system winds down and other schools - without Manchester's reputation - struggle to fill the gaps. Labour warmed to the sector during its term and spoke often of a new partnership with fee-paying schools. But it has firmly resisted any revamped APS system.

The independent school sector has come up with the outline of an alternative scheme and will want to push the argument with the new government. Under the Open Access to Schools in the Independent Sector scheme (Oasis), state school pupils will have portable funding - carrying their state support into the private schools.

"Independent schools now accept that no government will spend significantly more per capita on children in independent schools than it does in the maintained schools," says the Independent Schools Council.

State funding is between £2,400 and £5,700 a year, depending on the stage reached and the local authority. That means state funding would - on average - meet about half the fees. Parental contributions and private national support could help meet the gap, but the schools would make some sort of financial commitment.

Oasis would offer places to children of many abilities and would not be restricted to those selected by academic tests. It would need to embrace a good number of schools - and clearly would need active government support. The means test would also have to be much tougher - and would probably involve a "home visit" of some sort to make sure that the scheme was only open to those with financial difficulties.

What chances does Oasis have? Labour promised a review of the way state schools are funded in any second term. A reformed system - based on a basic pupil entitlement - would make such a scheme at least workable. Huge political obstacles still remain, but no one could have predicted four years ago the warmth of the government's signals to the sector in its past two years in office.

Some reforms in this area - particularly in inner cities where private schools are helping to fight disadvantage - seem at least possible."