There are several fundamental issues with the current university admissions system
1) Tony Blair's 50% target. This was always ludicrous. This was sold as 'a highly educated workforce is a well paid and productive workforce'. However, as you say, the actual effect was to devalue large chunks of tertiary education to the point of valuelessness and to equally devalue many degrees. And at the same time depress graduate wages due to competition. Note, the latter may or may not have been the actual objective.
2) Fees. Fees are the enemy of equality of opportunity, it's as simple as that. Enforcing fees while at the same time decimating central funding of higher education made tertiatry education a mass product business, not an elite product business. We went from michelin star restaurant higher education to MacDonalds higher education. Which is where many graduates have ended up, ironically.
3) Removal of the numbers cap on undergraduate recruitment. So you make every student pay 9 grand a year for their place. And then you make Universities utterly dependant on that funding stream to survive. And then you remove the limits on how many undergraduates any university can sign up in a given year. Hands up anyone who can predict of what will happen?
The current administration plan to remove the cap on how much Universities can charge in fees. Again, can anyone predict what will happen?
This actually has another undesirable side effect - the Universities now do anything they can to cram more and more students onto their campuses and damn the consequences. My own institution has a £1 billion (yes, one BILLION pounds) ten year building programme in place to massively increase student numbers, both by accommodating more students and having nice shiny new buildings to attract them with. Rumour is most of the people whose judgement is sound think it will actually end up costing about £1.4 billion. How well do we think academic rigour will survive a £400 million funding shortfall? What's the betting the result will be a massive 'cost reduction exercise' which involves every academic who isn't immediately generating the maximum possible income being booted out the door? Bigger classes, less teaching of non-profit generating subjects, and the expensive courses like medicine will be taken entirely by people who can afford massive fees (the children of the very rich who have no need or interest in actually doing the job and/or foreign students who will take their knowledge home with them) or will cease to be taught altogether.
New Labour/Coalition/Conservative (spot the difference!) policy towards English & Welsh tertiary education has changed it from a system designed for and interested in producing a small number of very high quality graduates to one which is basically about pushing as many people out the door each year with a scroll in their hand as possible, regardless of whether there are well paid jobs for those people to do afterwards or whether they actually have the skills required to do them.
Yours, a long time HE employee.