Gordon Brown has warned ministers he will not go on "an irresponsible pre-election spending spree".
Brown: I won't be irresponsible
Speaking ahead of next week's spending review he said government spending would grow by an average of 2.5% in real terms from 2006-2008.
Mr Brown told the CBI "there will be no short-termist quick fixes".
But Shadow Chancellor Oliver Letwin said Mr Brown's belief in "big government" had already led to the squandering of tax-payers' money.
Writing in the Daily Telegraph, Mr Letwin said the government's wish "to be seen doing things", meant there were "ever-growing layers of government" controlling local activity.
The chancellor will unveil his spending plans for the three years 2005 to 2008 on Monday 12 July.
There have been reports departments - such as defence - are currently locked in discussions about how big their three year budget will be.
The Spending Review is expected to form a key plank of Labour's campaign for the general election, which is tipped to be held next spring.
Mr Brown told the CBI president's dinner in London: "It has been in the past at times like this in the political and economic cycle - and I recall the mid-70s, the mid-80s, and the early 90s - governments of both parties have relaxed their fiscal disciplines and gone on to raise the rate of spending in an unaffordable pre-election spree.
"I will not repeat those mistakes."
"In next week's Spending Review, there will be no short-termist quick fixes, no irresponsible pre-election spending sprees, a ruthless focus on priorities and no relaxation of our fiscal discipline.
"We will - over this cycle and the next - continue to meet our strict fiscal rules, while meeting the commitments we have made on investment in health and education.
"So current spending will grow no more than an average of 2.5% in real terms between 2006 and 2008.
"And where there are increased resources to departments, I will demand that these resources go to the front line, I will demand that the investment is matched with reform, and I will demand that each department meets the efficiency targets we have set."
Mr Letwin said huge amounts of money were being used to fund a Civil Service the same size as the population of Sheffield.
The number of tax collectors had increased almost twice as fast as new doctors and nurse, he added highlighting the cost of "big government".
"We have to change the approach to governing: to govern better we have to govern less," he said.