Young people in England are the most illiterate in the developed world with many students graduating with only a basic grasp of English and maths, an in-depth analysis by the Organisation for Economic Co-operation and Development has found.

The OECD report rated English teenagers aged 16 to 19 the worst of 23 developed nations in literacy and 22nd of 23 in numeracy. In contrast, pensioners or those close to retirement were among the highest-ranked of their age group.

England had nine million people of working age with low literacy or numeracy skills, it said.

The number of low-skilled people aged 16 to 19 was three times higher than in top-performing countries such as Finland, Japan, Korea and the Netherlands. South Korea came top of the list for literacy — assessed by the ability to read and answer questions on a text — and numeracy.

The report, based on 2012 data, said although half a million students had started degrees last autumn, money would be better spent cutting the number of undergraduates and investing in basic education.

About one in five young university graduates could manage basic tasks, but struggled with more complex problems. The report concluded: "University teaching gives limited attention to low levels of literacy and numeracy. Graduates with low basic skills gain modest returns from their qualifications and will often not be able to repay their student debts. England has a large university system relative to a poorly skilled pool of potential entrants."

The study concluded that 7% of 20 to 34-year-old graduates in England have numeracy skills below level two, while 3.4% have literacy skills below this level. This means that they struggle to estimate how much petrol is left in a tank from looking at the gauge, or have difficulty understanding instructions on an aspirin bottle.

The report did acknowledge that reforms by Michael Gove, the former education secretary, and Nicky Morgan, his successor, are expected to improve standards.

Teenagers must now stay in education or training until they are 18 while tougher GCSEs have been introduced and dozens of vocational qualifications, such as nail technology, have been abolished.

Education policies

But critics said that the OECD report exposed the failure of governmental education policies.

Alan Smithers, director of the centre for education and employment at Buckingham University, told The Times: "Education in England has been blighted by the beliefs of progressive education. The older generation did English and maths in a formal way but progressive beliefs took over and the children's grasp of basic skills declined.

"There is still that legacy. Recent reforms are trying to rid us of it but clearly it hasn't completely been achieved. Successive governments have taken steps to put in place a suitable primary curriculum, but it does not yet appear to have fed through.

A Government spokeswoman said: "Good English and maths skills are essential to success in later life, and thanks to our reforms thousands more students are leaving education with these vital skills.

"While we are pleased the OECD recognises the progress we have made, we are not complacent, and will maintain our relentless focus on literacy and numeracy so all young people have the chance to succeed," The Mirror reported.