The replacement of student maintenance grants with privately-funded loans would save some #163;2bn annually, which would pay for many of the changes suggested by the Commission on Public Policy and British Business.

Its recommendations - announced at a London conference at which Labour leader Tony Blair was the star turn - include limiting class sizes to 30 in primary schools, reforming A-levels, improving all schools and providing high-quality nursery education for three and four-year-olds whose parents want it.

The commission - made up of business leaders working with the Left-leaning Institute of Public Policy Research - was set up in April 1995 by Labour peers Baroness Blackstone and Lord Hollick.

The intention was to build on the Commission for Social Justice, set up by the late Labour leader John Smith. While that investigated the allocation of wealth and opportunity, the new committee was to investigate the competitive role of the British economy and the role public policy should play in improving it. “If that commission was on how to spend it, this one is on how to make it,” said Lord Hollick, now chief executive of United Newspapers, at the launch.

Other commission members include Professor George Bain, principal of the London Business School; Bob Bauman, chairman of British Aerospace; Sir Christopher Harding, chairman of Legal and General; Lucy Heller, chairman of Verso; Gerald Holtham, director of the IPPR; Professor Richard Layard, director of the Centre for Economic Performance at the London School of Economics; John Monks, general secretary of the Trades Union Congress and Sainsbury chairman David Sainsbury.

Many of the proposals in Promoting Prosperity: a business agenda for Britain bear a distinct resemblance to declared Labour policy. It says: “Education and training have been subject to more upheaval in two decades than most other policy areas. Yet almost every assessment of the UK skills base, both by government and independent experts, suggests major reforms are still required.”

The commission concluded that the evidence showed a positive correlation between educational attainment and national prosperity. Competitive levels of education and training were important for national success but not a panacea. Comparison of the same industry across countries regularly revealed that higher skills - both academic and vocational - were associated with higher productivity.

There were generally positive returns to the individual from education and training, especially higher education and employer-backed training.

Accordingly, the commission found three broad failings in Britain’s education and training system which were directly related to business underperformance: a long tail of underachievement, children specialising too early and not enough lifelong learning.

On underachievers, the report says: “There is a large and internationally unusual disparity of achievement among pupils in the United Kingdom. A major cause of this disparity is diverse standards in schools and we believe this is the most urgent area for action. Another of the stronger messages we received, which we came to accept, is the importance of experience in the earliest years for eventual educational achievement.

“We feel confident, therefore, in urging that this problem be tackled. Reform of pre-school and primary education should aim to ensure that British children receive the best possible start in life. Resources should be channelled into pre-school education and primary schools with the specific objective of ensuring that by the age of 11 all children acquire literacy and numeracy.”

It recommends: “The top priority in education should be to improve the quality of teaching and learning in schools. As well as reform of teacher training and assessment, this will require increased spending.”

While the commission says education should be made more efficient and effective before extra money is spent, reforms to teacher training and career development, and the resources needed by problem schools would probably entail more Government spending, possibly #163;1bn a year.

Providing high-quality pre-school education for all children of three and over would also tackle underachievement, as would cutting primary class sizes to no more than 30. This would enable pupils to get more individual attention in their formative years and contribute greatly to the objective of ensuring that all British children attain at least basic literacy and numeracy standards by the age of 11. “Reducing all class sizes for five to seven-year-olds to under 30 would not be particularl y expensive, probably costing less than #163;100m.”

These measures would take between 10 and 20 years to filter through in increased competitiveness, says the report. People should not be able to drop out of education and training at the age of 16.

The commission says there are some teenagers staying on at school and retaking low-level qualifications when they would be better off getting more practical training in a more commercial environment. “The education ‘market’ may be distorting the routes to further education, however, because schools and colleges are the information gatekeepers about a youngster’s options.”

Expressing concerns about the 20 per cent of 16 to 19-year-olds in work with no training, the report recommends mandatory traineeships for this age group. Everyone should reach the equivalent of five good GCSEs by the age of 19.

It recommends that such traineeships should be mandatory - unlike the Government scheme due to start in September - and suggests that employers should be compensated for allowing young workers to do off-the-job training one day a week for two years. It would cost around #163;800m a year once up and running.

To combat early specialisation, the commission recommends that the long-term aim of phasing out A-levels should be pursued by broadening university entrance requirements. Greater use of AS-levels would be a way of doing this: the government should ensure universities insist on at least AS-levels in English or a modern language and maths or science.

“We have a clear idea of the ultimate objective - young people studying a broader range of subjects with everyone maintaining minimum standards of literacy and numeracy - but the upheaval required to get there should be minimised. Unification of the parallel academic and vocational streams is desirable but problematic in the medium term . . . the priority should be to broaden the academic stream.”

In addition, the commissioners recommend that funding biases in adult education should be eliminated by making all sub-degree courses free and charging partial fees for all part-time and full-time degree courses.

The commission concludes that public spending on education was 5.2 per cent of the gross national product on 1992 figures, putting Britain 14th out of 18 Organisation for Economic Co-operation and Development countries.To increase spending by one per cent of GDP would take the proportion back to its mid-1970s level and put Britain sixth in the OECD table. ”[That] does not seem outrageous. That would entail spending nearly #163;7bn more annually. In such a context our proposals for a net increase of #163;1.5bn a year are modest and more than consistent with the need for public economy.”

Promoting Prosperity: a business agenda for Britain (Vintage #163;8.99)

GROOMING AN EDUCATED WORKFORCE

The main recommendations of the report from the Commission on Public Policy and British Business:* Increased spending to improve the quality of teaching and learning, reform of teacher training and assessment. * Government-funded high-quality nursery education for all children over three whose parents want it. * Ceiling of 30 on primary class sizes.* Mandatory traineeships for workers under 19.* Broaden university entrance requirements to work towards phasing out of A-levels.* Make sub-degree courses free, charge partial fees for degree courses.