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The CBI has called on the government to reform public services to meet the challenges of the 21st century.

In its submission to the Treasury's forthcoming Comprehensive Spending Review the CBI is calling for the increase in public spending to be restricted to 1.6 per cent a year - considerably lower than the two per cent over three years put forward by the chancellor in his Budget.

And the UK's biggest business body has produced a five-point plan it believes will "transform the delivery of public services" in the country.

It recommends that the government should move away from being a provider of public services to a "commissioner", while more competition and markets should be introduced into service provision.

The reform plan also suggests a closer involvement of the public; an overhaul of pensions and public sector pay; and greater "sharing and relocation of costly or overlapping back-room functions".

"A strategic, coordinated approach to policy will be needed with a radical rethink of the priorities and objectives required," CBI deputy director-general John Cridland said.

"The Comprehensive Spending Review should be a blueprint for policy strategy, not only for the next three years but for the next 25. Our five-point plan provides just such a framework - we hope ministers rise to the occasion too."

Ian McCafferty, the CBI's chief economic adviser, added: "Balancing public expenditure with a competitive tax burden is a delicate act for government and the current state of the national finances have left ministers with little room for manoeuvre.

"Making the UK resilient enough to face this will demand a radical new approach from government. It will demand a real determination to tackle our current weaknesses of low skills levels, crumbling infrastructure, public sector inefficiency and only modest productivity growth."