Britain will be left playing an unwinnable game of "catch-up" if it does not significantly exceed the Government's target to get at least 40 per cent of the population educated to degree level by 2020, Lord Dearing has warned.
The target was adopted after Lord Leitch's review of skills warned that the country would not be able to compete economically if action were not taken to expand its skills base.
However, speaking to an audience of academics at the University of Hull, Lord Dearing suggested that the target was too vague - and that at least 5 million more graduates were needed over the next 12 years.
Lord Dearing, who oversaw the landmark 1997 review of higher education, said: "Something as imprecise as 'over 40 per cent' will not do as the target for 2020, when the Germans and Americans are at 40 per cent already."
He added: "A target of 40 per cent, as Leitch is often interpreted, would not provide us with a competitive workforce. Forty per cent would leave us where we have been for over a century - playing catch-up but never doing so. One distinguished committee after another has investigated our position and the recommendations have streamed out.
"Leitch is but one of more than 20 over the last century that has reported and made recommendations.
"That is why I interpret Leitch as requiring a lift from 29 to 45 per cent, representing 5 million students over the next dozen years."
Lord Dearing set out the key challenges he saw facing the sector.
He noted the Government's aim to ensure university expansion was employer-led and focused on providing the skills businesses specifically wanted, but added: "If only employers did know themselves what skills they will need in five and ten years' time."
On the introduction of specialised diplomas to run alongside A levels, he said that universities must ensure they make the most of the opportunity to get involved in reshaping the system in its infancy.
Universities have expressed "frustration and disappointment" at the results of a consultation on funding for students studying second degrees.
The Higher Education Funding Council for England received some 300 responses to its plans for implementing the Government's £100 million in cuts to students studying for equivalent or lower level qualifications.
At a meeting last week, Hefce's board approved the proposals despite calls from universities to widen the range of exempt subjects.
A statement released after the meeting said the board had noted that while "significant concern" had been raised about the policy, most respondents to the consultation agreed with Hefce's proposals.
The board agreed to concessions requested by the Government, including boosting the fund for part-time students to £30 million and an annual review of exempt subjects. It will consider exempting disabled students.
But a Universities UK spokesman said it was "disappointed" not to see more exemptions, as was Brenda Gourley, vice-chancellor of The Open University, which may lose more than £30 million.
The OU has called for computing students, students on low incomes and women returning to work to be excluded.
"The new policy discourages students from upskilling or reskilling, and it discourages institutions from catering to them," Professor Gourley said.