The confirmation last week that Scotland is to have a new university has put the controversial issue of mergers in higher and further education back in the spotlight.

The new institution, which will provide a local university for nearly 17,000 students a year from the west coast of Scotland, was set up following a £21.2m merger between Paisley University and Hamilton-based Bell College.

The bold ambitions to offer a range of courses from HNC up to degree level from four campuses in Ayr, Dumfries, Hamilton and Paisley have, for the moment been overshadowed by a long-running row over what it should be called.

Officials at the new institution want to call it the University of the West of Scotland, a name they argue has greater relevance to the area it will serve and more appeal abroad, but local politicians from Paisley have a different idea.

Scottish Secretary and Paisley MP Douglas Alexander has decried the fact the town will no longer have a university named after it. "Paisley is Scotland's largest town and has given the university its original existence and identity. For the university to turn its back on Paisley would be an act of betrayal," he said.

The row is a frustrating one for those anxious to sell the benefits of the new merged institution to a wider world not entirely convinced of the rationale behind the move.

There are those who privately say the merger was necessary because neither Bell nor Paisley alone were able to compete with the nearby universities of Glasgow, Strathclyde and Glasgow Caledonian and were struggling to recruit students. There are also voices who question whether the new institution is sustainable in the long-term over four campuses.

Professor Seamus McDaid, principal of the new institution, is adamant the merger has created a new centre of academic excellence in Scotland.

"What we are getting is a better academic institution," he said, arguing that with the additional financial strength the university would be able to employ more academics and therefore recruit high calibre students from across its target area.

The move raises the wider issue of whether Scotland has too many colleges and universities for such a small country and whether there should be more mergers in the future in both sectors.

There are currently 43 colleges in Scotland and 20 higher education institutions serving 585,000 students, but with predictions of a falling population there are fears the sector could go into decline unless student numbers are increased - or the number of institutions cut.

There is also the question of finance with the public money needed to fund Scotland's further and higher education system now running at £1.6bn annually.

Recent mergers in further education have led to the creation of Forth Valley College, Glasgow Metropolitan and Adam Smith and there are ongoing discussions about a new supercollege in Glasgow which would take in Central College of Commerce, Stow College, Nautical College and the new Metropolitan College.

Aberdeen University and Robert Gordon University held talks on a merger four years ago, a dialogue which may well be resurrected in the future.

Other potential targets for merger - following the example of the University of Manchester and UMIST - include the universities of Glasgow and Strathclyde in the west and Napier and Queen Margaret in the east.

Although there are no plans at present for such a move there are many within the sector who question whether Glasgow and Edinburgh can justify having so many universities on their doorstep.

The benefits of such mergers include better economies of scale, the removal of duplication of courses, slimmer administrative structures and a greater pooling of research talent and resources and a greater ability to attract private investment in competition with the best universities in the world.

However, there are also downsides. Universities which merge with a bigger partner often lose their identity and there is a fear that, for successful universities, merging with a lower profile neighbour could actually damage their reputation.

Ronald Crawford, the former academic registrar at Strathclyde University and founding secretary of the Committee of Scottish Higher Education Principals, now known as Universities Scotland, is one who argues that less is more in the Scottish context.

"Already the Scottish higher education system is unhealthily and confusingly diverse. We have more universities than we need or can afford," he argues.

"Most university administrators tend to sit on the fence because they don't want to be accused of making the first move or, more bluntly, because they detest the very idea of merger and refuse to go down in history as turkeys voting for Christmas. Nevertheless, the case for mergers is now stronger than ever."

The perspective of the Scottish Funding Council, the quango which distributes taxpayers' money to higher and further education on behalf of the Scottish Executive, is that mergers are to be welcomed only where there is an underlying educational or financial rationale which is accepted by both parties.

John Kemp, deputy director of strategic development from the SFC, said planning for the changing needs of students across Scotland meant that some mergers were beneficial, but that there was no optimum number of colleges or universities that the council was working towards.

"There has always been a suspicion we are trying to engineer mergers whenever possible, but that has never been the case," he said.

The idea of merger on its merits is supported by Sue Pinder, principal of West Lothian College and convener of the principals' forum at the Association of Scotland's Colleges.

She points to the Edinburgh and Lothian Colleges Group, a collection of six colleges which, rather than thinking of merger, work together to ensure there is no duplication of courses.

"Most college students live within a three-mile radius of where they study which demonstrates how important colleges are for delivering a service to the communities they live in. As long as colleges have good links to businesses or other forms of education to allow students to progress there is a strong argument for staying local," she said.

Universities too, are wary of talk of mergers while accepting they can occasionally be positive.

Universities Scotland, which represents university principals, said the merger of Bell College and Paisley was a "good fit" because they both share interests and benefit from the other.

However, Robin McAlpine, a spokesman for the organisation, said no merger of two institutions in the history of modern UK higher education had actually saved money - and greater collaboration was the most sensible way forward.

In November, 10 of Scotland's universities announced plans to collaborate on a £21m centre for economic research which they hope will allow them to compete with the best in the world.

The Scottish Institute for Research in Economics (Sire), alongside other centres of excellence in physics, life-sciences and arts has been established to counter the influence of elite universities such as Oxford, Cambridge and Harvard.