The CBI today ignited the spending cuts debate with radical proposals that were welcomed by the Conservatives, but immediately condemned by the unions.
It has called on the government to cut its spending plans by an extra £120bn in a bid to "balance the books."
It has identified how the required savings might be achieved, including the introduction of new technology and competition, eliminating waste and inefficiency, and tackling "unaffordable" pensions and pay.
Shadow chief secretary to the Treasury, Philip Hammond, said: "This report is a shocking indictment of the government's management of the public finances. Everybody is now recognising that the challenge is to make Britain's public services better, while coping with tighter budgets and we welcome the CBI's engagement in this task."
Dave Prentis, general secretary of Unison, said: "The CBI's plans threaten to choke off Britain's economic recovery. Cutting spending will prolong and deepen the recession, leading to many more thousands of job losses and misery for families across the country."
The CBI said chancellor Alistair Darling should use his pre-Budget Report to deliver a credible plan for balancing the public finances by 2015-16, two years earlier than planned.
The business group said £50 bn will need to be found between now and 2013 to allow for a slower economic recovery than the government is predicting, and a further £70bn after 2013 to balance the budget by 2015-16.
A radical re-design of the way public services were delivered was needed, argued the CBI, adding that this could avoid large tax rises and "crude" spending cuts at a time when the economy is still fragile.
John Cridland, deputy director general of the CBI, said: "We are facing the biggest peacetime deficit in our history, and it is not simply going to disappear with the economic recovery.
"That is why we need a fully credible plan to convince financial markets and taxpayers alike that the public finances will be restored to health.
"Our calculations suggest that an extra £120 billion will need to be taken out of current spending to achieve budget balance by 2015-16. Such savings cannot be achieved by tinkering at the edges, but will require radical public sector reform."
