Ron Dearing: Come on Mr Brown, give us another £10bn

Fear is a powerful motivator. I fear for Britain, 10 years on. We take near-full employment and rising standards of living as part of the natural order of things. They are not. Twenty five years ago, a senior Chinese minister said to me: "The wealth of China is its people." I was not impressed. But 20 years later, I sat up when a Midlands businessman returning from China warned his listeners of the emerging implications of economic development in China for the British economy. Add India, once recently described as the Back Office of the World, and we are talking of the potential of something near 40 per cent of the world's population. These two economies have averaged annual growth rates of 6 and 8 per cent a year for a decade. Their wage rates are a fraction of ours. They are clever, entrepreneurial peoples. How shall we compete?

Answer, by acting now on a realisation that the only basis of competitiveness, whether against East or West, lies in investment, and most of all in the educational and skills capital of our people. That is the true measure of the wealth of the nation. By OECD (Organisation for Economic Co-operation and Development) standards, we are no more than an average investor. Compared with, say, France, Germany and the USA, Britain is well behind the game, and has been for years. To survive in a global economy 10 years from now, when China and India will be major players, we need to be ahead, not behind. In each of the three years of the forthcoming triennial review of public spending, the Chancellor needs progressively to increase the planned proportion of national income committed to education and skills. Last year's 5 per cent share needs to be pushed up to 6 per cent, worth an extra £10bn a year.

The Government has, impressively, set a target of one half of young people under 30 in higher education by 2010. But will it be realistic about the cost? By the late Nineties, 25 years of expansion and tight control of finance had produced a 40 per cent cut in the amount spent per student on teaching in universities. That cut has now been halted.

Britain does well in international comparisons for university drop-out rates and for the quality of university teaching. That superiority will disappear unless we recognise that offering widening participation to non-traditional, often less well-prepared students means increasing the cost of teaching. So, it is not simply providing resources to match expansion, but facing the fact of a rising curve to educate those who have missed out at school.

As part of their submission to the Chancellor for the triennial spending decisions, the universities have said that over the three years they will need an extra £10bn. Big money, and that is only a fraction of the need over education as a whole.

The main battle for our future has to be won in the schools and colleges. It is here that we must lift the percentages of students achieving middle-grade performance, the so-called levels two and three, where we compare so badly, for example, with Germany. And if we are to make big inroads into the 10 per cent who leave school with little to show for it, we must find the additional resources for our primary schools. If we don't, the unsuccessful pupils are likely to regress ever further behind their peers, destined for a life in which unemployment and low income are part of their expectations. Putting that right will cost.

On top of that, we have the inheritance of around 20 per cent who left school in years gone by, as functional illiterates – as someone once put it, "Unable to find a plumber in the Yellow Pages".

The first job of the chief executive is vision. The second is seeing that the vision is delivered. The Government has the educational vision. The difficult bit is realising it when the pressure is to ease off. But if the ideas are not put into practice now, we can forget about a decent health service or decent pensions for the next five years, and watch while the jobs move East.

Lord Dearing has been an adviser to successive governments on education issues

education@independent.co.uk