Outsourcing more public services could save the Government around £22 billion without hitting quality, according to business leaders.
The CBI said "inertia" in Whitehall was stopping more state-funded programmes being run by the private sector and warned ministers that shunning reform would be a "recipe for disaster".
Its Open Access report, based on a study carried out by Oxford Economics, found improved productivity from bringing in businesses and independent organisations would lead to an 11% cut in costs.
John Cridland, CBI director-general, said the private sector was not always best but insisted increasing pressures on the state meant the Government must change the way functions such as administration are run.
He suggested schools should not waste time running their own meals service when they could outsource provision and focus on educational needs.
He said: "Our public services are under pressure as never before with increasing customer demand, including from an ageing population and an urgent need to manage costs. Carrying on regardless would be a recipe for disaster. The Government needs to face this tough policy challenge head on. Most public services are still largely state-monopolised and it's time to open some of them to competition. That is the way to maintain quality and achieve billions of pounds' worth of savings.
"We need the Government to set out which services it is prepared to open up to independent competition and when. Businesses recognised that there are justified concerns following recent high-profile failings and that they have to work hard to maintain public trust by consistently delivering high quality services."
The Government published its Open Public Services White Paper last year and insists progress on reform is being made.
A Cabinet Office spokesman said: "Improving public service delivery has been a coalition priority since day one. We have recently made a number of senior appointments, who all have significant commercial experience, to reform the way we deliver services and provide value for money for the taxpayer."
Dave Prentis, general secretary of Unison, said the report was "fundamentally flawed", with no proof that 11% savings can be achieved by privatising public services.