The CBI has warned that rising public sector costs could prevent the government from improving frontline services.

The business organisation has warned that unless a tight grip is kept on spending, rising costs could take up to £7.5 billion of government funds this year.

Publishing its submission to the Treasury ahead of the pre-Budget report, the CBI emphasised the need to press on with public service reform.

The CBI highlighted "relatively generous" wage growth and disappointing productivity performance which if left unchecked, said the CBI, will have a serious impact on the delivery of improved public services.