(I consider it drop-dead obvious that the task of verifying acquired skills and hence the power to grant degrees should be separated from the institutions that do the teaching, but let's not go into that.)

Thanks for saying this. I always felt it completely wrong that as a teacher I was supposed to indirectly measure my own success. In theory, I am grading my students, not myself. But in real life, if I get a random half of the class, and my colleague gets the other half, and at the end of the year his students get good grades and my students get bad grades, people start be curious why. (You bet that the students know what grades would they get in the other group.) One interpretation is that my colleague's grades are cheaper than my grades. Other interpretation is that my colleage is good at teaching, and I am bad. And usually you don't have more data than this, so you just have to make your guess. (Unless there is some external measure, for example students participating in a competition outside of the school.) If possible, parents will make a lot of pressure on school to provide the best teachers: which almost always means the teachers who give the best grades. Because parents' prior probabilities usually suppose that their child is briliant and only an incompetent person could claim otherwise.

The schools would be in my opinion much improved if teachers only did the teaching, and an independent institution would give the grades. There would be no pressure on teachers to give better grades, and although someone would prefer more learning and someone would prefer less learning, each student would bear the consequences of their choice. -- There is this technical problem that external examination is expensive and feedback needs to be frequent, but that could be fixed by having two kinds of grades: teacher would give informal grades for instant feedback, but at the end of the year the students would be formally tested by the external institutions, and the informal grades would be completely ignored.

Unfortunately, seems to me that today the mere idea of grading students is considered wrong by many people. Partially, there are good reasons, like the Goodhart's law, manifested by "teaching and learning for tests, not for knowledge". But many people don't want to fix this by improving the tests, but by getting rid of them completely. As if the feedback is completely unnecessary. I would prefer an imperfect measure (which is known to be imperfect) to no measure.