Britain’s recovery from recession following the Second World War owes more to the Raj than its ranking in the international education and training league tables.

The country had lost a colony but kept a strong industrial foothold in India. It was driving down already low labour costs with sweeping deregulation policies which British managements could never have pressed on workers at home. Economists cite it as a salutary case when commenting on apparent links between a country’s skill levels and its economic competitiveness.

Sig Prais, director of the National Institute for Economic and Social Research, lists factors which are equally if not more important than the skills base and over some of which educators and trainers have no control.

“The exchange rate, for example, determines very much whether a country is competitive. The quality of production is very important, as is stability of employment.”

The Confederation of British Industry also stresses other factors. It published a wish list of Government policies when the Tories were returned to power in 1992. For example, without low interest rates and stable exchange rates, no amount of good training would prevent Britain slipping down the competitiveness league tables.

Maintaining a tough line on public spending was also crucial - though not at the expense of investment in the infrastructure and training, the CBI warned.

Failure on this count brought a sharp rebuke from current CBI director-general Adair Turner last week when he attacked the Prime Minister for failing to provide a coherent and properly-funded transport policy.

“An excellent transport system is key to our competitiveness,” he said. “The White Paper [on competitiveness] still falls well short of recognising this.”

A simple observation in the skills audit for the White Paper brings home sharply the dangers of over-reliance on training as a force for competitiveness.

Of the five countries analysed, that with the highest gross domestic product and wealth per head was the United States. But, while a front-runner in terms of general education standards, it had the lowest number of vocational qualifications per person.

This suggests that the skills level is less important than standards of general education reached in school and college - a point acknowledged in part in the Government’s audit.

Gillian Shephard, the Education and Employment Secretary, issued a health warning with the audit at the launch of the White Paper. “It is a serious and thorough analysis, but international comparisons are always difficult and have to be treated with caution,” she said. “It provides a snapshot of the position in 1993 and 1994. Even then, the data do not fully reflect changes in recent years in different countries.”

Attempting to fend off critics who blame it all on 17 years of Tory misrule, Mrs Shephard added: “The UK figures, for example, do not take account of the substantial increases in achievement at GCSE, A-level and first degrees since the start of the decade.”

Alan Smithers, director of the Centre for Education and Employment Studies at Brunel University, points to another danger in the qualifications numbers game.

“Skills, not qualifications, are what counts when it comes to gearing-up the workforce to play an active part in a competitive economy. But in Britain we are in danger of suffering qualification inflation. This, in the longer term, devalues the qualifications people have, while giving no guarantee that the skills we need are provided.”

When the idea should be to promote competence, Government funding was directed more and more at qualifications, with too little thought about what they stood for.

Professor Smithers sees this as being as damaging as inflation, breeding unrealistic expectations of rewards and forcing out of the market permanently those without qualifications, even though they may have the skills.

And so, while the Tories congratulated themselves on the magnificent achievements brought about by school reforms, they failed to confront adequately the “duff” vocational qualifications, he added.

His criticisms are backed up by a damning report from the Office for Standards in Education, which has sought urgent action to improve general national vocational qualifications taken by more than 200,000 pupils and students.

This comes as no surprise to Professor Prais, who has been warning for years that the narrow skills base of national vocational qualifications has removed what little flexibility there was within the workforce. This raises another issue beyond the control of those who administer, teach or train - product quality.

While this is dependent on the workforce having the skills, these are useless without investment in the infrastructure and machinery, backed by Government policies which encourage investment . . . exactly what the CBI argued for four years ago.

Increasing numbers of economists are warning that massive privatisation of public utilities such as the railways is skewing the money markets towards the pursuit of high dividends in order to stop traditional investors defecting from existing private companies.

This leaves less to invest in company-based education and training. Yet again, it was the CBI which pleaded with the Government to create a climate favouring lower dividends and higher investment.

Professor Prais and fellow researcher Valerie Jarvis have just completed a comparative study of product quality in Britain and Germany. They looked at the production and consumption of 10 items in general and three in particular: secateurs, biscuits and blouses.

In every case, Germany was characterised by higher quality demanded and produced. For example, the average British blouse was made from four pieces of cloth. The German blouse was tailored to give shape and style with an average 17 pieces.

“This is partly because we do not have the machinists skilled enough to make it. We are not talking about a Pounds 250 blouse fit for a princess, but making it for Pounds 25 as against Germany’s Pounds 10,” he said. In other words, Britain was becoming a low-quality, high-cost nation.

The higher skill levels in Germany contribute in several ways. They allow operatives, technicians and designers to make rapid changes in production methods.

“British industry makes use of its more limited skill-base by concentrating on longer runs of simpler varieties - which are often subject to more intense competition from lower-wage economies,” Prais and Jarvis say in a report, The Quality of Manufactured Products in Britain and Germany.

Germany also has a more refined and better educated consumer consciousness and better vocational training of retail assistants.

What this also appears to generate is a wealthier nation, more stable employment and greater company loyalty among employees. The NIESR research suggests that income per head in Germany is now 40 per cent higher than in Britain. So, in addition to low quality and low cost, we are in danger of becoming a low-pay nation - Third World characteristics.

High investment, targeted at a range of policies - including good, flexible, well-assessed training - was the only way to ensure competitiveness, according to Sig Prais.