Taking the function of language to be communication, I should have thought literacy, in the school context, would be the ability to read non-technical English with ease and comprehension and to express oneself clearly and fluently in writing to all other English speakers.
Ensuring that all children have these basic skills by the time they reach the appropriate stage in their education, ought, I suggest, to be the objective –even if it means teaching some pupils received English almost as a foreign language.
It is not clear to me what harm may be done by universal tests to confirm the desired standards have been achieved. The first task would seem to be to get an agreed definition of “literacy” in this context.
What we don’t want is the situation described by the late Sir Bernard Miles in the character of the country bumpkin: “I had a tidy good edication. I could READ when I were eighteen –not to unnerstand it ,o’ course.”