TEN DAYS ago, the people of England, for once, could pat themselves on the back. Their children had achieved record results in GCSE exams. For the first time, more than half the candidates had achieved grades A to C, the equivalent of the old O-level standard - as recently as 1987, fewer than 40 per cent had attained such heights.

The head teachers' leader, David Hart, hailed 'gifted and dedicated teaching'; the chief executive of one examining board said pupils were doing 'better and better'; the schools minister, Eric Forth, congratulated children and teachers and looked forward 'to seeing more students than ever continuing in education beyond the age of 16'.

Just a few days later, John Patten, the Secretary of State for Education, pooped the party in the most dramatic fashion imaginable. He had received, he announced, a report from Her Majesty's Inspectors of Schools. They had 'serious reservations' about the results; they had 'limited confidence' that standards were being maintained. Mr Patten demanded an explanation from the exam boards within four weeks. 'It would be irresponsible,' he said, 'not to act swiftly.'

Mr Patten's comments had an immediate and devastating effect. The inevitable front-page headlines - six national newspapers splashed the story on Wednesday - suggested that the children's hard-earned certificates were scarcely worth the paper they were written on. Anguished

pupils and parents rang examination boards to ask if the results would be regraded.

The most startling aspect of Mr Patten's announcement was that HMI had, on previous occasions, praised the GCSE. As recently as January, it had said that examiners were making 'every effort' to ensure that standards were maintained from year to year. If exam results were better, so was the quality of children's work. The body officially charged with monitoring the GCSE, the School Examinations and Assessment Council - now headed by Lord Griffiths, a former policy adviser to Margaret Thatcher - had also reported 'successful examinations'.

'We are bewildered,' said George Turnbull, spokesman for the Southern Examining Group, one of the largest boards. 'There is no evidence that standards are falling. This year is no different from any other.'

Why, then, had HMI suddenly turned against an exam it had previously supported? More important, what was Mr Patten up to? The GCSE was introduced by a Tory government less than a decade ago. Ministers had promised that children would get better results under the new exam; the figures suggested they had done so. Why, then, was Mr Patten so anxious to publicise HMI's doubts, rushing to announce them in advance of publication?

The answers lie largely in decisions that the Government has already taken - that the GCSE should undergo extensive change. Indeed, some commentators would argue, the exam is being virtually abolished. The Tories may have introduced it. But did they ever really believe in it?

WHEN THE Tories returned to office under Margaret Thatcher in 1979, the GCSE was in its earliest preparatory stages. Shirley Williams, Labour's Secretary of State for Education, had decided in principle that it should succeed O-levels and CSEs.

The Tories' first instincts were to stop the moves towards a new, common exam. 'I argued that it would lower standards,' recalls Stuart Sexton, adviser to Mark Carlisle, the first Secretary of State under Mrs Thatcher. But Carlisle - and his successor, Sir Keith (now Lord) Joseph - came to understand why the teaching profession was almost unanimous in favouring change. O-level, though valued and understood by parents, employers and universities, was a highly academic exam designed only for the top 25 per cent of children. The CSE had been created in the mid-1960s for children of average ability but, Sexton says, 'it never really took off - employers didn't think it was worth anything'. Further, there was no exam at all designed for the bottom 40 per cent of children.

Before Joseph gave the final go-ahead, he demanded - and got - two assurances from civil servants and inspectors. The first was simple. Bright children would still be stretched. Though all children would be examined and graded under the GCSE umbrella, the cleverest could take separate papers or, at least, answer separate questions.

The second assurance was a more complex matter. 'Keith Joseph was horrified to discover,' recalls Eric Bolton, the head of HMI at the time, 'that we had no idea whether standards were going up or down. All the O-level system did was to sort out the top children each year.' O- levels, in other words, operated rather like the Football League: there were bound to be winners and losers. Joseph wanted something more like the driving test or like swimming and music tests: grades should be awarded for specified 'knowledge, understanding and skills'. Then it would be possible to monitor trends in standards, year by year. Announcing in June 1984 that courses for the new exam would start two years later, Joseph told the Commons: 'It will grade candidates on the basis of what they themselves know and can do and without regard to the performance of others.'

Thus, far from diluting standards, the GCSE would put them on a proper basis for the first time. But, as the new exam developed, it became clear that things were not turning out as Joseph hoped and expected.

'Frankly,' one of his former advisers says, 'he was hoodwinked. He believed people who said they were experts. He has a super academic mind himself and he has tremendous integrity. He thought everybody else was of the same high quality.'

Only in maths, modern languages and some science syllabuses did the exam boards set separate papers for brighter and less able children. In several subjects, such as English and history, children of all abilities took exactly the same papers and answered exactly the same questions.

Why did this happen? Teachers argued that to set separate papers and questions would entail sorting children into sheep and goats before they sat the exams, perhaps even before they started the courses. This, they said, was unfair; it would limit aspirations and ambitions. But the real motive, many Tories argued, was egalitarianism. George Walden, himself a former education minister and now a backbench Tory MP, says: 'People in the education system wanted to change things for social and moral reasons, to make it up to the little lad who had no books at home, so he would not feel upset. They do not believe in differentiation or rigour. So the Government struggles with a ghost in a machine.'

Joseph's second demand - that there should be specified criteria for the award of each grade - proved even more ghostly. Professor Desmond Nuttall of London University's Institute of Education says: 'The exam boards spent hundreds of thousands of pounds and produced numerous reports. But they failed to produce the criteria.'

The problem was that exams in such subjects as English and history covered too wide and nebulous a range of knowledge and skills. 'It's simple in the driving test,' Professor Nuttall says. 'To pass, you have to do everything. A brilliant hill start doesn't compensate for not being able to turn a corner.' In GCSE English, nobody denies that poor spelling should be penalised. But should a child who does everything else brilliantly - grammar, punctuation, essay-writing, oral expression, appreciation of literature - get the lowest grade because he or she spells abysmally? The exam boards thought not.

IN THE Commons in June 1984, it was George Walden who asked the only question to which the Tories wanted an answer: by introducing this new exam, combining O-levels and CSEs, was the Government 'merging up or merging down?' Instinctively, Tories believed the latter. Perhaps only Joseph could have convinced them - and particularly Margaret Thatcher - to the contrary. 'He was one of us,' says a former Thatcher government adviser.

By the time children began taking the new exam in 1988, Joseph had left office and neither of his two conditions for protecting standards had been realised. What was left was something that looked suspiciously like CSE for all. Children at the highly selective public schools - attended by most Tory MPs' children - were sailing through with strings of A grades. Newspapers reprinted questions that looked absurdly easy ('Select the even numbers from 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20'). It emerged that, in nearly all subjects, coursework accounted for at least 25 per cent of the marks and, in some subjects, all the marks. How, it was asked, could the boards be sure that it was the children's own work? Worse, this coursework was marked by the children's own teachers. How did the boards know that teachers were applying consistent standards?

None of this was an accident. It was for exactly this kind of examination that the majority of the teaching profession had been agitating for years. They believed that coursework meant a steadier commitment from children and a fairer assessment of their abilities.

The first results in 1988 showed that a higher proportion of children were getting the equivalents of the old O-level grades. And, with each succeeding year, the results improved. Convincing explanations were plentiful. The new exam had increased motivation. Schools, forced to publish exam results and to compete for parental custom, were better at preparing children. The growing shortage of unskilled jobs had persuaded more pupils that they needed qualifications.

But Tory backbenchers - and some ministers, including John Major - smelt a rat. If children were so much better, why did employers still complain that school-leavers could not spell or punctuate? Was it possible that the papers and the marking had become easier? Nobody could give definite answers. As Professor Nuttall puts it, 'there is no standard metre - exam grades are the sum of fallible human judgements'.

The failure of the attempt to set criteria for awarding grades meant that the only benchmark was comparison with the old O- level and CSE exams. The exam boards gave GCSE grades A to C to those who, in their judgement, would have got O-level grades A to C. But the O-level itself had no fixed standard, and syllabuses and papers had changed out of all recognition. Examining, particularly in the arts and humanities, is an inexact science. It was impossible for thousands of different examiners, working over hundreds of syllabuses in dozens of subjects, set by four different exam boards, to mark to the same standards.

In this sense, HMI was stating the obvious. And, when its report was published two days after Mr Patten's announcement last week, it gave a more mixed view than the Secretary of State had implied. It said, for example, that coursework assessment was working well: 'minor adjustments' were 'usually sufficient to ensure reasonable consistency'. Marking schemes were 'normally rigorous'. The common papers used in English, history and technology 'provided suitable challenge for the average and more able'; but surprisingly, HMI criticised the separate papers set for the brightest children in maths, science and modern languages for being 'insufficiently demanding'.

Further, the report said that HMI's criticisms were 'neither new nor easy to solve'. The change in HMI's view of the exam was more one of tone than of content. Its reports are normally written in gentle, somewhat convoluted language. This report was more direct. In a small minority of school subject departments, marking procedures were 'unacceptably poor'; some behaviour in certain departments was 'inexcusable' in ignoring administrative procedures; there was on occasion the 'alarming' absence of clearly defined criteria to mark papers.

Exactly why the HMI had changed its tone remains a mystery. But sources inside the Department for Education point out that the inspectors are in disarray. Eric Bolton, head of the inspectorate for eight years, retired last year; an outsider has been appointed as his successor. Many inspectors are awaiting the sack because the Government has decided that most of the HMI's operations should be privatised. 'On what basis,' says a source close to ministers, 'could they possibly have stood up to what they know we want?' And ministers have good reason for wanting ammunition to attack the GCSE.

ANY TORY education minister goes in mortal fear of appearing 'soft on standards', particularly as the party conference season approaches. When they mount the platform, ministers like to announce a 'shake-up', which will eradicate 'sloppiness' in schools.

The HMI report allows John Patten - a new minister, promoted to Cabinet rank since the elections - to do precisely that, satisfying rank-and-file Tories who have always been suspicious of the GCSE without upsetting large numbers of parents, pupils and teachers who believe that the new exam is working perfectly well.

Decisions to transform the GCSE by 1994 are in place and have been announced in dribs and drabs. First, coursework, on the particular insistence of John Major, is being drastically reduced. Second, the boards will have to offer different papers for children of different abilities in every subject, not just in maths, languages and science.

Third, the grading system will change. Instead of being graded from A to G (as in the present system), children will be graded from 10 to 4, according to the levels in the new national curriculum. Level 10 will be higher than the present A grade, thus introducing the 'super-A' for bright children that the GCSE critics have long demanded. Remarkably, there will be no precise equivalent of the present grade C - it will no longer be possible, therefore, to say exactly how many children have achieved the old O-level standard.

Fourth, the new exam will at last have the sort of criteria for awarding each grade that Lord Joseph demanded eight years ago. This time, the examiners have cracked it. They started by setting the criteria and then designed the exams; in the GCSE, they tried to do it in reverse.

But, the critics say, there is a price. The new-style GCSE will test a much narrower range of skills and knowledge. Teachers and pupils will have much less choice of subjects and syllabuses. Some examiners believe that, because of the reduction in coursework, fewer children (and, particularly, fewer girls, since girls tend to do worse in traditional exams) will get high marks.

And, then, no doubt, Tory ministers and MPs will be satisfied that standards are not being eroded. 'People tend to value the exams that most children don't pass,' says Eric Bolton. 'But a compulsory system of schooling must have the aim of giving the majority some qualification and some motivation. That's where we've always gone wrong in the past. Unlike our competitors overseas, we designed exams so that the majority would fail. The GCSE tried to get away from that, without losing the old O-level standards. But it was a compromise with which the Tories were always uneasy.'

On one thing almost everybody agrees: the GCSE was imperfect. The danger is that the Government is about to replace it with something worse.

(Photographs omitted)