In his keynote speech to delegates in Liverpool, the business secretary said that current inflexibilities meant companies were unable to grow because young people were leaving education without the necessary skills for work.
However, Mr Cable said it would be difficult to change the learning environment without tackling entrenched “cultural prejudices and vested interests”, such as the belief held by some that the only “gold-standard” institutions were those of the Russell Group rather than teaching-focused universities.
He said: “There has got to be a revolution in education and training after 16.
“My Conservative colleague David Willetts [the minister for universities and science] and I want to sweep away the artificial barriers between universities and further education; between academic and vocational; between full-time and part-time and continuing lifelong learning.”
Mr Cable declared that he was “doing everything” he could to ensure that any new system of student finance was progressive, but he made clear that individuals would have to pay more towards degrees than they do at present.
“In reality, the only way to maintain high-quality higher education with less government money is for the graduates who benefit to make a bigger contribution from the extra earnings they enjoy later in life,” he said.
But he added: “I am doing everything I can to ensure that graduate contributions are linked to earnings. Why should low-paid graduates – nurses, youth workers or science researchers – pay the same as corporate lawyers and investment bankers?”
• Full coverage of the Liberal Democrat conference tomorrow