Image copyright Getty Images Image caption Expanding free childcare to one and two-year-olds is one of the proposals from the CBI

More free childcare and cutting taxes for the low paid are among the measures to raise living standards being recommended by business leaders.

The CBI said the slow pace of the UK's economic recovery had "hit people's finances hard", and "immediate help" from the government was needed.

The CBI, which represents more than 190,000 businesses, is holding its annual conference in London.

Living standards and the UK's place in Europe are expected to be major themes.

'No miracle cure'

Speaking ahead of the conference, the CBI's director general, John Cridland, said the UK needed to "face up to some real long-term challenges" including greater competition from abroad, and changing demands for skills from industries.

But he said shorter-term measures were needed alongside long-term plans to help low-paid households still struggling in the wake of the recession.

Media playback is unsupported on your device Media caption David Cameron, Nick Clegg and Ed Miliband all spoke at the CBI conference

"The financial crisis and the slow recovery have hit people's finances hard," he said. "Living standards will gradually improve as the economy does. But growth on its own will not be the miracle cure.

"To ease the pressure on families and people on low incomes, we want immediate action, including cutting employee National Insurance and making childcare more affordable."

The average couple with two children saw their income fall by £2,132 a year in real terms between 2009-10 and 2012-13, the CBI says.

The business group is calling for the threshold at which people begin paying National Insurance to rise to £10,500 by 2020-21, a move it says would be worth an extra £363 a year in take-home pay to dual-income households.

It is also says extending the free childcare currently offered to three and four-year-olds to cover one and two-year-olds as well would help raise family incomes and get more adults into work.

CBI deputy director general Katja Hall told the BBC: "The package we have put out in the report is completely affordable within the next parliament".

She added that the childcare proposals the CBI was making would cost £0.3bn.

Mr Cridland told the BBC that the reason the CBI wanted to see more reasonable childcare costs was so that families "can make a even bigger contributions to the world of work".

Weekly childcare costs for pre-school children Region Nursery, child 0-2 years Nursery, child 2 years+ Childminder, child 0-2 years Childminder, child 2 years+ East of England 111.90 105.02 121.28 120.45 East Midlands 94.30 97.19 86.27 86.05 London 140.12 136.93 136.4 138.77 North East 108.24 102.66 90.88 90.09 North West 98.00 97.58 84.81 89.27 South East 130.08 121.58 110.32 115.86 South West 109.70 104.96 100.48 99.54 West Midlands 112.17 101.85 85.52 82.85 Yorks and Humberside 94.03 87.94 90.68 90.75 England average 110.95 106.19 100.74 101.51 Scotland average 106.04 102.06 95.59 96.84 Wales average 103.17 102.28 94.24 94.24 Source: Family and Childcare Trust/Annual childcare costs survey 2014 based on 25 hours per week

Europe question

A government spokesman said the coalition appreciated that "the effects of the great recession are still being felt", but said: "We must keep working through the plan, that is building a resilient economy."

The UK's place in Europe has been a theme of the conference, ahead of the general election next year with the pledge of an in/out referendum on EU membership from Prime Minister David Cameron, should the Conservatives win a majority.

In his conference speech, Mr Cameron rejected claims that an EU referendum would damage the UK economy.

He said the UK was securing more inward investment than the whole of the EU despite his 2017 referendum pledge.

The Deputy Prime Minister, Nick Clegg, told the CBI conference that he thought it was vital that Britain remained within the European Union.

Mr Clegg insisted that the UK should build alliances within the EU, rather than appearing "petulant". He said that it was "nonsensical" to threaten to leave.

Addressing the conference, Mr Clegg said: "There is a slightly odd either/or debate about this: that if you want to reform Europe, you also have to threaten to leave it. I think that's just nonsensical.

"You don't win the argument by petulantly stamping your foot and saying 'Well, if I don't get what I want I'm going to leave in a huff'."

Labour leader Ed Miliband also used his speech to push the economic case for remaining in Europe.

Mr Miliband said that in his view, leaving the EU would make Britain weaker not stronger. "There is no future for Britain in turning inwards, turning away from the world," he said.

'Separate worlds'

Also speaking at the CBI conference was the Archbishop of York, the Most Reverend John Sentamu, who is chair of the Living Wage Commission. Dr Sentamu said that most businesses could afford to pay the Living Wage - which is calculated at £9.15 an hour in London and £7.85 outside.

"It has become clear that the minimum wage (£6.50) is inadequate," he said.

Dr Sentamu said that income inequality in Britain was dividing the country into have and have-nots, with people living in separate worlds.

He told business leaders at the conference that "income inequality is a giant we must slay together".