Business leaders condemned the Government for caving into unions over pensions yesterday, amid reports of a growing rift between Gordon Brown and Tony Blair.
John Sunderland, chairman of Cadbury Schweppes, said it was "totally unacceptable" for public sector workers to retire at 60 while those in private firms would have to continue to 67.
Mr Sunderland, president of the CBI, told the business group's annual conference that Labour was losing its hard-won reputation for supporting industry.
It followed criticism by CBI director general Sir Digby Jones, who accused Labour of an "act of craven surrender" to its "union paymasters".
But the Government's pensions policy was looking increasingly chaotic as Ministers prepared for the publication of the Turner Commission's report on Wednesday. Trade Secretary Alan Johnson last month negotiated a deal with unions guaranteeing existing public sector workers the right to retire at 60.
But a review led by Lord Turner of Ecchinswell is expected to recommend that the retirement age be raised to 67, raising the prospect of private sector employees working seven years longer than those in the public services.
Gordon Brown, the Chancellor, wants to scrap the deal and impose the same rules on public sector staff as everyone else, according to reports.
But this has placed him on collision course with Mr Blair, whose spokesman insisted the deal must stay.
The Chancellor was also attacked by union leaders yesterday. TUC general secretary Brendan Barber said "whoever in Government" was talking about re-negotiating the deal "ought to be slapped down hard".
But speaking to business leaders at the CBI conference in London, Mr Brown was unapologetic.
He said there was still "a lot of work to be done" on public sector pensions, and suggested the deal with the unions had not been finalised.
The Chancellor is expected to argue, once the report is published, that Lord Turner's proposal to raise the general retirement age means the agreement must be revised.
Pensions reform has already caused one cabinet rift, after reports circulated that Mr Brown was opposed to restoring the link between earnings and pensions - another of the Turner report's recommendations - because he believed it was unaffordable.
Mr Brown's allies blamed Number 10 for leaking news of his concerns, claiming it was an attempt to make the Chancellor look like the enemy of reform.
In a speech to the CBI conference yesterday, Mr Brown insisted he was not opposed to changes.
He said: "The issue is not reform versus the status quo. There must be reform.
"The debate ahead will show that the issue is how best we achieve the right reforms, reforms which are sustainable, fair and affordable."
Downing Street said it would not renege on its deal to let existing public sector workers retire at 60.
The Prime Minister's official spokesman said: "We reached agreement a month ago and the Government's view is that it's better to stick to agreements you have reached, rather than tear them up within a month."
Tory leadership contender David Cameron, also speaking at the CBI conference, condemned the deal.
He said: "It cannot be right to say to state employees 'You can retire at 60' and say to everyone else 'You have to work until 67'. This has got to be gripped."
The Turner Commission is also expected to recommend a Government-backed pensions scheme called "Britsaver".