Chancellor Gordon Brown must curb pay rises in the public sector as part of a raft of changes to lower public spending, according to employers’ body the CBI.
The demands are part of a call for action by the CBI in the run up to the chancellor’s pre-budget report, which is due later this month.
The CBI claims public spending must be cut to fill a £10bn ‘black hole’ in treasury funds. It urged Brown to cut back on the rate of growth of public spending from 12% to 10% in the next two years, reducing the planned increase in total spending from £61.4bn to £51.4bn.
Pay rises must be cut from 6% to 4.5% in line with public sector averages, and there needs to be a new drive to crack down on absenteeism in the public sector, the CBI said.
CBI deputy director-general John Cridland said: “While the chancellor can shift the fiscal goalposts and delay the Comprehensive Spending Review, tackling the structural deficit can only be deferred, not ducked forever.
“The prudent decision would be to reconsider the government’s spending plans for the next two years and get a grip on the deficit now.”
Cridland warned that the future relationship between government and business could deteriorate as a result.
“The going is getting tougher – the relationship will depend on the nature of the decisions the government takes and how credible they are with the business community,” Cridland said.