Every secondary pupil in Scotland will sit compulsory literacy and numeracy exams under proposals for a radical shake-up of the qualifications system announced yesterday.

Fiona Hyslop, the Education Secretary, wants to introduce Scottish Certificates for literacy and numeracy in S4 to address concerns from business that too many pupils are leaving school without basic standards.

The move is part of a raft of proposed reforms to Scotland's education system, which will see the long-anticipated scrapping of Standard Grade exams.

If approved, Standard Grade and equivalent Intermediate exams would be replaced by a new qualification - referred to as a "general" exam - which will cover the traditional subject areas. It will be tested in fourth year, in keeping with Standard Grades, but will be done through a mixture of an exam and assessment of work throughout the year.

Academically-gifted pupils will not have to sit the qualification and can begin their Highers at the start of fourth year. This brings to an end the unpopular "two-term dash" for Highers.

Pupils who opt for the new qualifications could still progress to Highers at a later date and could sit vocational qualifications.

A winter exams diet is being considered to bring in flexibility.

Ms Hyslop said that pupils who complete a clutch of Highers and Advanced Highers in languages or sciences will be awarded a Scottish Baccalaureate. It is designed to raise their profile as they have seen a drop in numbers.

All the proposals will be subject to a consultation which will run from June to October, but the Scottish Government hopes changes will be introduced in time for the 20012-13 exams diet.

Ms Hyslop said: "This is a drive to get away from a system where pupils are taught to the test or only know what they need to know in order to pass an exam."

She said the basic literacy and numeracy certificates would give pupils practical skills.

Last night, the proposals were given a mixed welcome. Business representatives said there was a need for a renewed focus on basic literacy and numeracy.

Teachers said allowing brighter pupils to progress to Highers was a good idea, but warned the exam would have to be a high-quality alternative to Standard Grade.

Rhona Brankin, education spokeswoman for the Scottish Labour Party, said: "These new awards do not in themselves ensure that young people become literate and numerate or that Scotland eradicates illiteracy."