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A Department of Education inquiry has found evidence of significant grade inflation in Leaving Cert results and in higher education.

Minister for Education Batt O'Keeffe revealed details of the review to the Dáil this afternoon. It has been prompted by concerns raised by US multinationals about a decline in the quality of some graduates.

An analysis of the overall grades in the Leaving Certificate between 1992 to 2009 shows there has been a significant increase in the proportions scoring at grade A or B and A or B or C at higher level.

For example, the proportion scoring grade A or B has increased from 27 per cent in 1992 to 43 per cent this year while the proportion scoring A or B or C has risen from 64 per cent to 76 per cent.

Most of the increase took place during the 1990s and grades have largely stabilised since the establishment of the State Examination Commission in 2003, the report.

A similar trend of increases in first-class honours awards is also evident in the universities.

The percentage of university graduates getting first-class awards in honours degrees in Level 8 programmes has increased from 8.3 per cent in 1997 to 16.2 per cent in 2008.

The percentage of HETAC graduates getting first-class honours awards in Level 8 higher degrees increased from 11.2 per cent to 16.6 per cent between 1998 and 2008 in the institute of technology sector, excluding DIT.

The Minister said a number of influential voices in the employer community have voiced their concerns about graduate quality and it was important to listen to those concerns and be responsive to boardroom demands.

"In other words, our approach to developing education policy must be strategic and more aligned with industry needs,” he said.

Fundamental questions about the quality of graduates, the quality of teaching and learning, resourcing the system and responding to the needs of enterprise are at the heart of the National Strategy for Higher Education which will be published before the summer, he said.

In relation to awards standards in higher education, the key to addressing possible grade inflation is through better internal quality assurance and external quality review, he said.

These tasks are being undertaken by colleges themselves and HETAC; the Further Education and Training Awards Council; the National Qualifications Authority of Ireland and the Irish Universities Quality Board. All these agencies have been subject to external review by international panels and have been adjudged to be performing these functions to relevant international standards.

Legislation is now being drafted to set up a new qualifications and quality assurance agency that will merge these bodies.

Having a single body dealing with qualifications, external quality assurance and course approval in the further and higher education sectors fits well with the Government's broader public sector reform agenda.

A Bill is expected to be published during the summer and the new qualifications and quality assurance agency will be set up early next year.

The Bill provides that all institutions implement the recommendations of an external quality review and the new agency will be empowered to undertake reviews at a thematic or cross-institutional level.

This could include, for example, examinations of standards across institutions in a particular subject area or a cross-institutional review of the effectiveness of external examining.

On the Leaving Cert, the Department said a range of factors could explain the improved results.

These include:

- Extensive curriculum reforms that were designed to make subjects more accessible;

- Introduction of second assessment components which have been a feature of recent curriculum reform;

- Investment in professional development for teachers;

- More exam-orientated teaching;

- Better information for teachers and students in the form of published marking schemes, exemplars of standards, past exam papers, teacher guidelines, curriculum support services, educational websites and improved internet access generally.