The lack of a coherent approach to policy making in the coalition could lead to "catastrophic consequences" for the country, according to a committee of MPs.
In a damning report published on Tuesday, the public administration committee said it had "little confidence that government policies are informed by a clear, coherent strategic approach".
"Policy decisions are made for short-term reasons, little reflecting the longer-term interests of the nation," the MPs said.
The committee said this had led to a series of high profiles mistakes including the negative reaction to George Osborne's Budget.
Labour has slammed the Budget as an "omnishambles" following criticism of the so-called "pasty tax" and "granny tax" as well as the decision to scrap the 50p top rate of tax.
The committee warned that the "absence of strategic leadership or weak leadership" will result in a vicious circle in which "bad policy and failure in outcomes undermine the values and aspirations of the public and faith in their leaders".
Bernard Jenkin, the Tory chair of the committee, said there was no doubt that the government was presented with very severe economic and political challenges but that was not an excuse for poor planning.
"The government presented us with six strategic aims, such as 'a free and democratic society', but these are so general as to be meaningless," he said.
“The complex, diverse and unpredictable domestic and global challenges facing the UK mean that strategic thinking is both increasingly difficult to sustain, and yet it is more vital to do so.
"Failing to do so in the long term undermines national self-confidence and in the short term could have catastrophic consequences."
The report could not come at a worse time for the government, suffering as it is from a series of public relations disasters including the perception that it is lurching from crisis to crisis without direction.
A largely self made fuel panic as well as the awkward revelation for the Conservative Party that one of its officials was promising policy influence in exchange for donations has provided ammunition for critics.
The criticism that the government is too short term in its thinking will be particularly stinging given pledges by David Cameron and Nick Clegg to engage in a "horizon shift" when they came to power in order to think long term.
"Our horizons have shortened as the timescales of our problems have lengthened," Clegg said in September 2010. He called for a "fundamental alteration in the timelines of our decision-making".
Michael Dugher, Labour’s Shadow Cabinet Office Minister, said:
"Incompetence and unfairness are the defining characteristics for this Government."
"At the last election, David Cameron promised he would change Britain for the better and that we would all be in this together. He has failed on both counts."
"He should get a grip of his out of touch Government, change course and stop making hard-pressed pensioners and families pay the price for his incompetence."
Support for Labour has reached its highest level for nine years according to a poll published on Monday evening, as backing for the Conservatives slumped dramatically.
Ed Miliband's party has seen its poll rating rise by four points in the past month to 41%, a figure last enjoyed by Labour during Iain Duncan Smith's ill-fated leadership of the Tories, Monday's ICM survey for the Guardian found.