The BCC says the education budget should not be immune to cuts
There should be no "sacred cows" when it comes to making spending cuts in the pre-Budget report, a national business body has warned.
In its latest economic assessment, the British Chambers of Commerce (BCC) said reform of the public sector must be the "cornerstone of a credible plan".
The public sector employs nearly six million people and accounts for nearly half of all government spending.
Alistair Darling will deliver his pre-Budget report on Wednesday.
The chancellor will be expected to chart the road to economic recovery and give more details of how he plans to halve the deficit over four years.
Appearing on the BBC's Andrew Marr Show on Sunday, he said that the pre-Budget report would give a "clear direction of travel" for the UK economy.
However, he refused to indicate what might be in the report, except to say that a major NHS information technology system would not go ahead at this moment.
The pre-Budget report will be the last before a general election, which must take place by June 2010.
Meanwhile, Conservative shadow chancellor George Osborne reiterated to the Andrew Marr Show that his party would hold an emergency budget within 50 days of taking office.
The BCC, which represents 100,000 small companies, said the public sector should not be seen as some sort of "sacred cow" as the government looks to reduce borrowing.
It said reforming the public sector, including pay and pensions, should be a crucial part of plans to reduce spending.
Director general David Frost said: "Public sector spending needs to be brought under control. What we are saying is there cannot be any sector immune from those cuts.
"We have health and education, about a third of public expenditure, and if we ring-fence those and say they cannot be touched, what that means is other aspects of public expenditure will have to take a very significant cut and that could harm business."
Liberal Democrat Treasury spokesman Vince Cable told BBC Radio 5 live he agreed.
"You can't just ring-fence particular areas," Mr Cable added.
"In the case of the health service, of course what people want to see is that front line services are protected.
"But I think it's also true that the NHS could be delivered more efficiently, and that's I think a workmanlike approach that one has got to adopt. But there shouldn't be sacred cows in that sense."
BBC business correspondent Joe Lynam said the growing gap between the benefits enjoyed by workers in the public and private sectors had been brought into sharp relief during the recession.
The BCC report also called for investment cuts to be halted and reversed as companies would find it tough to increase output once the recession ended and demand started rising.
It also predicted unemployment would peak at the lower than forecast 2.7m and the economy would grow by 1% next year.