A central planning agency is urgently required to make higher education meet the needs of a modern learning society, ministers have been told.

The agency should preside over funding incentives and planning mechanisms to overcome resistance within the sector to demands for change, a group of influential civil servants, university heads and researchers have concluded.

A report from the group says the agency's remit would be to answer "the very questions raised by the secretary of state" about the size, shape and purpose of the sector in the Government's higher education review.

It would be responsible for sharpening up policy options on priorities, funding, student support and human resource planning for the academic profession, and "it would also have to be given the means of influencing the self-governing communities in universities, or change will not take place".

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The agency would help to create an overarching strategy dovetailing policies for education, training and employment with policies for industrial development.

The report, funded by the Department for Education and Employment, the ³ÉÈËVRÊÓƵ Funding Council for England and the Economic and Social Research Council, was published this week by the University of Durham's education department, and is now in the hands of the DFEE. It is the result of a two-day seminar held in Oxford during the summer to debate issues arising from the higher education review.

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The report, ³ÉÈËVRÊÓƵ in a Learning Society, says that an absence of overall planning in higher education and "a failure of leadership in British universities" has allowed traditional institutions' "obsession with youth" to take precedence over a growing need for more diversity in the system.

A shift in the balance of resources should be made from initial to continuing and lifelong learning to combat this, and persuade higher education to "re-position itself in the market" by making lifelong learning its overall strategic objective, it says. But such a move to a new, extended mission for higher education would have to be backed by "the necessary resource", providing incentive for change.

The report says: "It is time for some creative Government intervention" to ensure that the achievement of national education and training targets "will be put to productive use". And it warns: "If a policy for expansion in higher education is pursued on its own, then scarce public resource may be squandered on the production of the world's most highly educated dole queues".

The report also calls for:

* Integration of policies for growth in higher education and industrial development;

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* A two-year "foundation degree", also offered in further education

* Public funding of tuition costs for all part-time students

* Fundamental reform of the funding of tuition fees and student maintenance

* A "cadre of trained administrators" to take paperwork off the hands of academics

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* A Teaching and Learning Board to promote innovative teaching methods

* More cash for education research.

The group of 30 who met in Oxford included eight senior civil servants: Bahram Bekhradnia, HEFCE policy head; Leslie Wagner, vice chancellor of Leeds Metropolitan University; David Robertson, director of the Institute for Policy Research at Liverpool John Moores University and a member of several Labour party policy think tanks; Robin Middlehurst, director of quality enhancement for the ³ÉÈËVRÊÓƵ Quality Council; and the report's author, Frank Coffield, professor of education at the University of Durham and director of the ESRC's learning society research project. It wanted to see a direct link between higher education expansion and industrial growth.

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³ÉÈËVRÊÓƵ in a Learning Society, available from the School of Education, University of Durham, Pounds 12.50.