The Merseysiders begin their campaign on Tuesday by hosting Bulgarian champions Ludogorets and will also play holders Real Madrid and Swiss side Basle in Group B.

Scholes, a member of the Manchester United side that won the 2008 final, expects Anfield to be a tough place for visiting sides.

The 39-year-old, speaking in his role as a pundit for ITV’s Champions League coverage, said: “Liverpool are the dark horse of the competition this year.

“Brendan Rodgers has done a fantastic job. The style of play he’s adopted is exciting to watch and the players seem to have taken to him. I feel they will do well with the players they have.

“The big advantage they have is a home crowd. Anfield is always a hostile place to go, which is something Manchester City lack.”

Liverpool qualified for the Champions League after a superb 2013-14 campaign in which they finished close runners-up to Manchester City in the Barclays Premier League.

Since then they have lost their talisman Luis Suarez to Barcelona, but Scholes thinks Mario Balotelli could prove a good replacement.

Speaking about Suarez, Scholes said: “He’s a great player, but don’t forget they’ve signed Balotelli who, on his day, can be a match winner too.”

City are hoping to make a greater impression in Europe this season after reclaiming the Premier League crown.

They reached the knockout stages for the first time last term and Scholes believes going further will be manager Manuel Pellegrini’s top priority.

City begin their campaign against 2013 winners Bayern Munich on Wednesday and also face CSKA Moscow and Roma.

He said: “Champions League will be their main focus for the season. Their owners will want to see them push on in the Champions League.

“They have a tough group this year, but with the players they have they need to go on to win it, and there’s really little excuse not to do well.”

Scholes doubts whether Arsenal, who face Borussia Dortmund, Anderlecht and Galatasaray, will have the fortitude to seriously challenge for the trophy.

He said: “They always qualify and always seem to get through the group. The only problem with Arsenal is when they meet top teams, they don’t seem to have the consistent level of mental strength to get through it.”

Chelsea have made a strong start to the season in the Premier League and Scholes thinks the domestic title might be Jose Mourinho’s priority.

He said: “Whilst The Champions League is the ultimate trophy for any club team, I believe Chelsea’s main objective is winning the Premier League this season.

“If you ask Jose Mourinho what you’d rather win now, I think the answer would be the Premier League.”

United failed to qualify for the Champions League this season and, despite their stature, Scholes is not sure the competition will miss his former club.

He said: “Maybe, but there’s still a lot of major clubs in it.

“Let’s just hope it’s one year, you have to earn the right to be in it and they haven’t done that for this season.”