Oct. 19 (Bloomberg) -- U.K. Prime Minister Gordon Brown must slash government spending by 120 billion pounds ($196 billion) to restore investor confidence, Britain’s biggest employers’ group said, as a lawmaker estimated the size of government liabilities at more than 2 trillion pounds.

The Confederation of British Industry said the government should make the cuts to its budget and drive up efficiency by giving more of its members contracts to deliver services. The CBI wants the cuts implemented by 2015, two years earlier than the government plans.

The government “must act now to provide the confidence that’s needed,” said Ian McCafferty, the group’s chief economist. “Current plans are too far off to bring the necessary credibility.”

The CBI today made its case to Chancellor of the Exchequer Alistair Darling, who is due to publish the Treasury’s autumn budget in the next few weeks. The plans echo proposals by Conservative Party leader David Cameron, who earlier this month said deeper and more urgent cuts are needed to balance the budget.

Britain’s economy shrank 5.5 percent from a year ago in the second quarter, depressing tax revenue and pushing up unemployment. The Treasury expects its deficit to touch 175 billion pounds this year, about 12 percent of national income and the most in the Group of 20 nations.

More Than Double

Conservative lawmaker Brooks Newmark today published his own estimates of the size of the U.K.’s liabilities, including items kept off the balance sheet by the government. He reached the figure of 2.2 trillion pounds, more than double the official figure of 805 billion. Most of the increase comes from public sector pension liabilities, which he puts at 1.1 trillion pounds. Newmark estimates the liabilities added from bailing out banks at 130 billion pounds.

“We need greater transparency so the public understand the magnitude of the problem,” Newmark said. “The government wants more accounting openness from business. It should be no different.”

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

Last Updated: October 18, 2009 19:01 EDT