In a speech to Goldman Sachs in London, Richard Lambert, the Confederation of Business Industry’s (CBI) director-general, warned that the green shoots starting to appear across the economy are being put at risk by the poor state of the UK’s public finances.

Lambert said: “Green shoots are starting to appear across the economy. But they have shallow roots, and there are plenty of dark clouds on the horizon. Policymakers still have a lot of work to do if those green shoots are going to turn into a rich harvest.”

Lambert has called on the Government to make a choice between pinning its hopes on a global economy recovery to contain the UK’s huge deficit, or bold and radical reform of public services to get the finances back on a sustainable path.

With the IMF projecting the UK’s general Government deficit next year will be the highest within the G7 nations that, according to Lambert, will mean constant efforts to cut public spending and constant pressure to push taxes higher.

Lambert said: “Cuts in public spending don’t have to be translated into equivalent cuts in the delivery of public services, especially if the alternative is a growing burden of taxes which bear down on the process of wealth creation. Now is the time to start thinking about spending smarter, rather than spending more.

“The UK faces a general election at some point in the next year or so. There won’t be a better – or more urgent – time for a battle of ideas about the size and role of the state.”