In these tough times for higher education, postgraduate courses need to be tailored to Britain's needs

Today, the Smith Review of Postgraduate Education has delivered its report, endearingly titled One Step Beyond – score one for the Nutty Boys. It rightly points out the higher-degree market is big business: £1.5bn in fees, 36% growth in students over the past 12 years, and the UK government and devolved administrations spend £850m supporting it. And it's a functioning market: universities set their own fees and students decide whether to pay them.

The first rule of policy fight club is don't be a referee when the participants set their own rules. However, there are Queensberry issues here that may require intervention. First, are we doing enough to ensure that the system is fair? If a master's degree is the new 2:1, will an unregulated market without a clear and coherent system of loans and bursaries allow bright kids from tough backgrounds to step up the degree ladder? The independent review into the funding of student fees must urgently take this into account.

Second, we need to know that we are getting strategic value for our vast amounts of public money. We must ensure that our future needs for expertise in, say, clean energy, re-industrialisation, digital innovation and sustainable agriculture are being identified and met by strategic financial investments by government agencies.

This is by no means an easy task, and there will be precious little additional funding, so hard choices may have to be made. But universities that are of the highest quality and demonstrate entrepreneurship must be rewarded if we are to meet the challenges of the Bric economies, let alone of those like Germany and the US, who are investing heavily in their science base.

And, in order to meet these needs, we may have to invest in international students as well as home grown. Global businesses do not care which country they hire from – they want people who can perform at the highest levels. And one of the reasons they stay in the UK, is the quality of the researchers and graduates. They highly value the specialist skills of UK postgrads, while at the same time pushing for the better leadership and entrepreneurial expertise they increasingly require to remain globally competitive. If we can't grow our own, we must ensure that people whom businesses value come to work and study here.

We don't need to soul-search about postgraduate education, but we do need everyone involved to be smart about future challenges.

• David Docherty was an external adviser to the postgraduate review, but is writing in a personal capacity

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