Where else would I get the opportunity to go to university at 37 and use that experience to change my career direction completely?"

Bruce Nicol would say that, wouldn't he -- he is management development officer of the IBM plant in Greenock, talking about the IBM policy of transforming its workforce so that more than 500 of its employees have degrees. But he is absolutely right to recognise that higher education is the most valuable resource for developing the qualities that individuals now need to be employable and companies now need to compete.

To be innovative is to be competitive. Advances in technology and global markets pose new and greater challenges to companies, forcing them to move ever faster to survive. A quality workforce, able to generate dynamic ideas, is one of the crucial ingredients of an innovative business. Higher education is a prime source for such people. For the individual, a degree increases employability in the modern labour market. The recent OECD study of employment confirmed industry's experience of the last decade: there has been a shift in demand from low skill to high skill jobs.

The traditional "graduate job" has been replaced by a graduate career, spent contributing to the success of a dozen firms rather than one or two. Bruce Nicol also shows that the development of high skills among the workforce is as important as the involvement of the young. Ninety per cent of the year 2000's workforce is in employment now.

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The unprecedented rise in demand for higher education -- an international phenomenon -- should encourage us. It suggests that its value is understood throughout society. The demand from young people continues to grow. Despite the demographic fall in the numbers of young people demand continues to increase, by just over 1.5 per cent this year. And employers too are negotiating arrangements with higher education institutions in greater numbers -- new recruits to Cadbury Schweppes can study for a business BSc at London University as they work and Ford works closely with Anglia Polytechnic University.

Against this background, I believe that policy-makers should concentrate on two goals to increase the contribution of higher education to the economy.

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First, a demand-led, expanded system. Every individual who is qualified and able to benefit should have a place. The CBI has set a target of 40 per cent of young people graduating in the year 2000, and it is not unrealistic to expect a graduation rate of 50 per cent ten years into the next century, especially as 60 per cent or more of young people will be qualified to enter the system by 2000. The CBI has also recommended that National Advisory Council for Education and Training targets should include the 40 per cent target in the national targets.

Second, a flexible curriculum focused on the individual and on top quality. Individuals must be able to learn whatever skills and knowledge are most relevant to their needs. This is particularly important for employees, who will rarely wish to update their skills through a full-time three or four year degree course.

The present Government policy is to put a ceiling on expansion, yet to keep the number of places available at a constant level for the next two years will not meet the demand from students for opportunities to develop their skills in higher education. Also the effective rationing of places is at odds with the policy of encouraging higher attainment up to 18. Many people who have been encouraged to maximise their educational achievement and who expect to benefit from higher education will not now find places.

The ambivalence about expansion is down to funding -- a desire to reduce public spending. To enable the system to continue to expand, more resources need to be found. On CBI calculations, a 40 per cent graduation target in the year 2000 means that a funding gap of Pounds 3 billion will need to be bridged. Possible contributors include the Government, institutions themselves, students and employers. From Government, at the least, public funding for higher education should be maintained at a constant proportion of national income and should increase in line with the growth of the economy. From institutions, the progress made in reducing unit costs is impressive. There is scope for continuing these efficiency gains in an expanded system, although the CBI is at one with other commentators in saying that the quality of provision should not be allowed to suffer. Regarding students, the Government's contribution should be reduced by directing maintenance grants and loans to those whose need for them is the greatest. It makes no sense for the Government to continue funding the living costs of students who could afford to contribute more, if this means denying potential students a place in higher education altogether.

However, these funding issues are complex and involve major questioning of public policy. The current review of higher education by the Department for Education is timely and welcome. The CBI hopes that it leads to a consultative Green Paper which sets out and comments on each of the options available.

Given the diversity and autonomy of institutions, to find a solution for an individual-focused curriculum is challenging. But it is necessary if the learning needs of individual students are to be put first, particularly for those who desire to accumulate a broad portfolio of skills. Choosing to Change, the recent report by David Robertson for the Higher Education Quality Council, is an important opportunity for institutions to concentrate their attention on how such a theme might be implemented.

The more competence-based the curriculum, the more students will be able to manage their own learning and the more they will take employment in their stride. But for many institutions such a change will take time -- the term "competence" suggests a definite mastery which goes against the grain of open-ended academic enquiry.

Equally, employers have made it clear that core skills -- communication, information technology, the application of number, problem-solving and personal skills, and modern language competence -- will enable students to flourish in employment, in further study and in their lives. The Enterprise in Higher Education initiative has given the opportunity for many students to develop these skills and should become embedded in the provision offered by all institutions. But we would like to increase the momentum behind core skills even further. The CBI has submitted to NACETT that foundation target four should be altered to read: "All qualifications to deliver core skills by the year 2000".

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If the future funding of higher education can be secured and a more responsive curriculum established, then we would be well on our way, but a further range of issues will still need to be tackled, which include the following:

National standards for degrees. It is historically understandable that more than 100 different institutions should develop their own standards, but the situation makes it impossible for individuals to be confident of the value of degrees.

The Committee of Vice Chancellors and Principals and HEQC have begun work on threshold standards. Clearly the definition of the standards will be a tremendously difficult exercise, given the variety in courses that the HEQC has highlighted in Learning From Audits.

The CBI has proposed that one quality body for higher education should be established, rather than maintaining the division of responsibility for quality assessment between the higher education funding councils and the HEQC. This body could be funded by both Government and institutions, using the funds that currently go to HEQC and to the funding councils' assessment work.

The more effective training of lecturers. This vacuum is only part of a wider one over training throughout teaching. If there is to be a clear definition of the outcomes of learning, there needs to be a transformation in lecturers' own training as teachers. There is a persuasive case for an education-lead body, building on the extensive work already underway in many institutions.

In 16 to l9 education and training, the study of three A levels or one GNVQ and one A level does not provide the breadth that individuals now need. It seems to me that the solution to a flexible curriculum in higher education -- credit accumulation and transfers -- should be echoed at 16 to 19. This will enable students to manage their learning, allow accumulation of credit, allow change of learning routes and develop core skills. Students would complete as many units as they wished, forming a personal careership portfolio. The implications for this scheme are not great for GNVQs, which are composed of units at present. A levels would be enhan-ced under such a scheme. I hope that this does not stop Government from investigating the idea.

The role of employers in the funding of students. At present employers demonstrate their demand for graduates by paying more for their labour. Under the CBI proposals for securing expansion, many students will incur greater levels of debt on graduation. It may well be that employers will have to find ways of helping such students as they become employed if they want to keep the development of high skills an attractive option in the labour market. Employers will also need to buy more provision from higher education in the future.

Last but not least, the funding route. A transformation in teaching standards and the curriculum would result in significant quality improvements. But customer enthusiasm -- the key quality criterion -- depends on financial power. That is why a financial credits system, similar to that for young people leaving full-time education at 16, should be introduced. This would give coherence and substance to all the preceding points on quality.

But the largest issue, just as in business, is the reality of change. I have tried to convey the extent of the change which will be needed to make individuals the centre of gravity within the system -- to focus the curriculum and the funding system upon them, and ensure that their degrees are meaningful. The paradox is that change is necessary and yet not inevitable. We cannot go back to the situation of 20 years ago even if we wanted to -- the demands on the system mean that it must become larger, more flexible and more transparent. And the status quo is not an option. But well-managed change will not happen on its own -- it is up to us all to ensure that it does.

Dominic Cadbury is chairman of Cadbury Schweppes and chairman of the CBI's education and training committee.

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