The British Chambers of Commerce (BCC) is making a series of recommendations to the coalition government in advance of its emergency budget on 22 June.
These include ditching the commitment to ringfence spending on health, which the BCC argues is 'unrealistic and unsustainable in the current circumstances'.
It adds that by protecting certain budgets and programmes without clear justification, it will force more drastic cuts to capital investment, which is essential to underpin the UK's long-term economic recovery.
By contrast, it points out that health and aid budgets were cut in Canada's successful 1990s consolidation - preventing ‘slash and burn' elsewhere.
David Frost, director general of the BCC, said: ‘If tax rises are unavoidable, they should be targeted at consumption taxes rather than payroll, income or profits.'
Meanwhile, the nationals report today that the coalition government is to review public sector pensions. Deputy prime minister Nick Clegg said: 'Private sector workers have already seen final salary schemes close, while returns from defined contribution schemes fall. So, can we really ask them to keep paying their taxes into unreformed, gold-plated public sector pension pots? It's not just unfair, it's not affordable.'