Britain’s fiscal position is unsustainable, the British Chambers of Commerce has warned, saying there should be no “holy cows” when it comes to making spending cuts in the pre-budget report.<br /><br />The business organisation said reform of the public sector must be the “cornerstone of a credible plan to reduce spending”, and urged the government to freeze public sector pay and reform pensions.<br /><br />Government borrowing is forecast to rise to a record £175bn this year and £188bn in 2010-11, before easing to £169bn in 2011-12. Public debt is set to increase to “dangerous” levels of more than 90 per cent of GDP, the BCC said. <br /><br />“Given the perilous state of the public finances, we cannot afford any sacred cows when it comes to making spending cuts – no matter how politically desirable it may be,” said BCC director general David Frost. But he called on the government to avoid damaging the economic recovery by imposing new business taxes or raising National Insurance contributions.<br /><br />The BCC downgraded its GDP projection for this year to a fall of 4.6 per cent (from a 4.3 per cent drop in September), followed by growth of one per cent in 2010 and 2.3 per cent in 2011. But it now believes that unemployment will peak at 2.7m next summer, rather than 3m as feared.