The number of 16-year-olds who left school without qualifications in English and maths increased this year, analysis of the GCSE results shows.
The proportion of pupils gaining at least five GCSE grades A-G, including English and maths, fell 0.2 percentage points to 84.6 per cent, well below the Government's target of 92 per cent. Employers have repeatedly criticised school leavers for lacking basic skills.
The number of pupils gaining the equivalent of five or more A*-C grades rose by just 0.5 percentage points to 53.4 per cent. The official target is a two percentage point improvement every year until 2006.
The figures will disappoint ministers, particularly as the tables include a greater range of vocational qualifications. Under the new system, a student gaining a City and Guilds progression award in bakery is given the same credit as if they had gained five A*-C grade GCSEs.
Ministers also failed to meet their pledge that by 2004 at least 38 per cent of pupils in each authority would achieve five or more A*-Cs. Seven councils did not reach that level this year. They were: Blackpool, Bristol, Kingston-upon-Hull, Knowsley, Nottingham, Salford and Sandwell.
A fourth target, for 60 per cent of pupils to get five good GCSEs by 2008, also looks unlikely to be reached. The Government said it may be reviewed in the light of the report by Mike Tomlinson, former chief inspector, on the future of 14-19 education, which suggests that GCSEs and A-levels should be replaced by a diploma.
Phil Willis, Liberal Democrat education spokesman, said the results showed the need for the Government to implement the recommendations of the Tomlinson review. "These results reveal the extent to which the current system is failing to meet the needs of many students," he said.
Neil Bentley, head of skills and employment at the Confederation of British Industry, said: "The Government has not just missed the target, it has failed even to get the ball in play. Forty-seven per cent of firms are dissatisfied with school-leavers' basic skills and a third are forced to provide remedial literacy and numeracy training to compensate for shortcomings in state education."
Steve Sinnott, general secretary of the National Union of Teachers, said:
"The problem with these targets is they seem to have been plucked from the air. It's inevitable the rate of improvement will slow down. The proportion of pupils gaining five A*-Cs has risen by 11.5 per cent to 53.4 per cent since 1999.
The Government highlighted the results of specialist schools where 56.9 per cent of pupils gained five A-Cs, and said pupils in disadvantaged areas were catching up their more affluent peers.
David Miliband, schools minister, said: "Once again we have seen the biggest jumps in achievement in areas that were once written off as failing and in schools that face some of the most challenging circumstances.
Schools are working exceptionally hard to improve their performance and proving that living in a disadvantaged area doesn't have to be a barrier to success."
Lewisham in south London was the fastest improver, while Newcastle, Rochdale and the London councils of Islington and Hackney were among the most improved.
At A-level a record 23,640 pupils gained at least three A grades, almost two-thirds of whom were from state schools.
GCSE and Equivalent Results for Young People in England (provisional) is available from www.dfes.gov.ukrsgatewaycontents.shtml