Britain does not have a world-class higher education system. We have a small number of truly world-class universities, able to compete in the top tier of global research. We have pockets of excellence elsewhere, as well as vocationally focused courses that equip people for jobs such as engineering and nursing. But we also have far too many courses that are poor quality, low value or simply not needed.

In 15 subjects, more than a quarter of graduates earned less than the National Living Wage after five years

A third of graduates are not in graduate jobs. At least 30 per cent of degrees do not deliver a total positive return. Only 57 per cent of graduates are in full time work 15 months after graduation – while 13 per cent of young NEETs (Not in Education, Employment, or Training) have a degree or other higher education qualification. Outcomes for those with poor A-Level results, with BTECs and on franchised degrees are significantly worse than the sector average. In 15 subjects, including Sociology, Creative Arts and Design and Performing Arts, more than a quarter of graduates earned less than the National Living Wage after five years.

Policy Exchange’s latest report, Tarnished Towers, reveals a higher education system in melt-down, with job losses, course closures and restructuring initiatives across the sector, alongside a wholesale collapse in outcomes, standards and the graduate premium.

Standards have declined in every part of the sector, with one in ten new students now admitted without an A-Level or equivalent qualification. Almost ten per cent of students admitted with BTECs drop out after one year. Yet despite this, the proportion of Firsts awarded has more than doubled over the last 18 years, from 13 per cent to 30 per cent.

The root cause of this crisis is the twin-track policy combination of mass expansion and marketisation, pursued by governments of all parties over the last 30 years.

The totemic commitment to expansion was made in Tony Blair’s pledge for half of people to go to higher education, and came to fruition in the Coalition Government’s removal of student number caps in 2015. It has led to a dramatic expansion in the number of young people doing a traditional full-time bachelor’s degree, concentrated in particular subjects, especially in low-cost business studies courses. This has occurred at the expense of other forms of tertiary education, including Level 4 and 5 qualifications, adult learning and further education – leading to a mismatch between the skills the country requires and those it is producing.

Contrary to promises, this dramatic and costly expansion of Higher Education has failed to noticeably boost economic growth or productivity, to ease our skills shortages or to increase household incomes.

The expansion was directly enabled by student debt, a transparent yet successful attempt to transferring liabilities off the Government’s balance sheet. While most people agree it is fair for individuals to pay something towards their degree, the current situation – in which graduates groan under £50,000+ of debt and swingeing interest rates – has gone too far. It is now seriously harming the ability of young people to settle down, buy a home and start a family.

Meanwhile, the attempts to create a market have failed – because the higher education sector, is not a market. The individuals who make choices do not feel the impact of the price, and the cost of poor choices is borne not by the consumer or the provider, but by the state, in the form of the portion of the student loan that is written off. There is almost no competition on price and the focus upon the ‘student as consumer’, exemplified by the National Student Survey, has led to too many institutions prioritising student ‘satisfaction’ at the expense of quality and educational rigour. Oversight of quality and standards by the regulator manages to be simultaneously burdensome and bureaucratic yet almost entirely ineffective.

Radical reform of our higher education sector is badly needed. We need to reduce the number of university places by 30 per cent, cap the proportion of 2:1s and Firsts awarded by universities and enforce tougher entry standards, including a new national entry test for applicants who fail to get at least CCC at A-Level. There should be a five-year freeze on fees, the abolition of real interest rates for graduates on Plan 2 loans, and student loan overpayments should be made tax deductible – to help graduates pay off their loan sooner. The savings that accrue from cutting unnecessary courses should be partially reinvested in science, engineering and medicine, as well as vocational education and apprenticeships.

We need a smaller university system with higher educational standards – and a fairer balance of funding between the individual and the state. It will not be easy to break with the failed consensus of three decades – but it is the only way to deliver the system we require.

Iain Mansfield is Director of Research at Policy Exchange