Director-general Digby Jones made the plea in a speech to business leaders at the annual lunch of the CBI London region at Guildhall yesterday.
He said that rumours of tax rises were fuelling worries about a return to tax-and-spend policies that are not linked to changes in the way services are delivered.
'Recent talk of tax rises means there is a real danger that the need for reform will get lost in the chatter. We need more money going into public services but throwing cash at the problem will not improve the long-term situation.
'Look at Scotland where health spending per person is 20 per cent greater than in England, bringing it close to the EU average. Yet waiting lists there have actually risen while the number of beds has fallen, all adding to a health record that is among the worst in Europe. Money alone has clearly not sorted the problem.'
He added: 'The last thing we need is tax rises that only hit business. All of the UK must play their part in paying for public services. Business has paid an increasing tax burden over the past five years while the man in the street probably thinks the government hasn't put up taxes.'
Mr Jones said ministers must face down opposition to public sector reform, even though it may mean being unpopular in the short-term.
'We support the government drive for public sector culture change, but ministers must keep the foot on the gas in spite of the opposition. That may mean being unpopular in certain quarters but leadership is about being unpopular now and again.
'We need to take the best of the public sector and the best of the private sector and together build a new culture that puts the customer first. A partnership of the public and private sectors is the best way to get real improvements in services.'
Mr Jones sought to soothe the fears of public sector workers and people who are suspicious of private sector motives.
'Private sector involvement isn't about driving down everybody's wages. Nor is it about saying that the private sector has all the answers. It is about putting the customer first, not the system.
'This country has to get rid of this ideological hang up about private sector involvement. It is an ideology that belongs to bygone days. People don't worry about it so much in France and Germany and maybe that is one reason why they have better services than we do.'