Charles Clarke admitted that the Government would have failed if literacy and numeracy rates did not rise "massively" in the next few years.
The Secretary of State for Education was responding yesterday to disappointing GCSE results, which saw the pass rate plunge to its lowest level for more than a decade.
He singled out maths and languages after results showed top grades in each had fallen. In maths, the number obtaining a C grade or above fell by 1.1 per cent. Mr Clarke was speaking as pressure grew for action to reduce the numbers leaving school with no qualifications.
Sir Tom Shebbeare, chief executive of the Prince's Trust, said: "Our own research shows that people's biggest barrier to success is their lack of qualifications. For many of these young people it may be the beginning of a lifelong struggle to find work. The result can be a downward spiral towards loss of self-confidence and even crime, homelessness and drug misuse. All of us feel the impact."
Damian Green, the Conservatives' education spokesman, wrote to Mr Clarke asking if schools would incur financial penalties for not meeting government targets. Under an agreement between the Department for Education and Skills and the Treasury, the number of pupils getting A* to C grade passes had to rise by two per cent - or money would be withheld.
Yesterday's results showed a 0.2 per cent rise in A* to C grades. Mr Clarke insisted on the BBC Radio Four Today programme that "very strong progress" had been made this year. The number of top A* and A passes had risen by 0.3 per cent to 16.7 per cent - leading to worries of a wider gap between top performing and less able pupils.
However, he conceded that the fact that between seven and eight million people did not have basic literacy and numeracy was a "tremendous indictment both of the education system now and of the ... past".
"That's why we gave the priority we did to primary, that's why we gave it to key stage three (11 to 14-year olds), that's why we're now giving it to 14 to 19 [-year olds]," he added.
Asked if the Government would have failed if results did not improve "massively" on illiteracy within the next five years, Mr Clarke said: "I think we would have failed in those circumstances, yes."
But, there was good news as school results emerged yesterday. Eight of the top 10 schools in the comprehensive list were specialist secondaries. The top performer, Thomas Telford - a City Technology College - outshone all the country's 164 grammar schools. For the fourth year running, all its pupils obtained at least five top A* to C grades and the 168 youngsters who sat the GCSE notched up an incredible point score of 94 - the equivalent of 11 A*-grade passes apiece.
One of the reasons for its success is that all its pupils take the GNVQ Information and Communications Technology - equivalent to four GCSEs.
Sir Kevin Satchwell, the school's headteacher, said: "Taking it does have an amazing spin off for other subjects - 98 per cent got A* to C grade in English, 96 per cent in science and 94 per cent in maths.
The country's top performing grammar school was Reading. All its pupils obtained at least five top A* to C grade passes.
Meanwhile, the clamour grew for the demise of the GCSE as a national public examination for 16-year-olds.
Graham Able, the incoming chairman of the Headmasters' and Headmistresses' Conference - which represents top boys' independent schools - and head of Dulwich College, south London, said: "The GCSE has served an important purpose but its time has come.
"We now have a large percentage staying on in education beyond 16. There is little justification in doing an exam at an age when most people are not leaving school."Reuse content