Employers should be offered a financial incentive to improve the skills of British workers, ex-CBI boss Sir Digby Jones has told the BBC.
Sir Digby thinks training should be made much more accessible
Sir Digby, who has been appointed the "skills envoy" by the government, said the UK faced a "serious decline" in business due to poorly trained workers.
He said the fact that millions of UK adults could not read, write and count properly was a national disaster.
He called on Chancellor Gordon Brown to fund the necessary skills training.
Sir Digby said it was important to maintain the UK's edge in leading universities, but basic skills in the rest of the population should not be ignored.
"We have in the United Kingdom seven million adults who cannot read, write and count and are not functionally literate as an 11-year-old should be," he said.
"And we have 11 million adults who cannot add up two three-figure numbers.
"This a national disgrace for the fifth biggest economy on earth to have that statistic happening in our society today."
Sir Digby was appointed as the "skills envoy" to coincide with the publication of the government-commissioned review - led by Lord Leitch - into Britain's skills needs.
That review warned that Britain was "on track for undistinguished mediocrity" if it failed to upgrade the skills of the workforce.
In the first indication of how he will tackle this challenge, Sir Digby said the government must offer a "fiscal bribe", through tax incentives to employers, especially small businesses, to get them to train their staff.
He said adequate skills training was not about businesses wanting to make more money, rather a matter of social inclusion.
Meanwhile, a study from the international business school, INSEAD, due to be published, suggests Britain's ability to innovate economically could be hampered by its "relatively poor skill levels".
The study puts Britain in 16th place on an international table measuring countries' "human capacity".