Kwarteng will need to make £60bn of ‘painful’ cuts

And they warn that failing to credibly explain where the cuts in spending are coming from risks more turmoil in the markets.

“The Chancellor might, through some such combination, find a way to have debt stabilised in the final year of his forecast without rowing back on any more of his recently announced tax cuts,” the report says.

“But promising a tightening on this scale through spending cuts alone, without actually specifying which budgets would be cut, risks stretching credulity to breaking point at a time when the government’s fiscal strategy is under intense external scrutiny, not least from the financial markets on which government borrowing depends.”

The IFS said government borrowing now looked set to hit almost £200bn this year – more than double the £99bn forecast at the time of the last budget in March.

The think tank says faster growth would “definitely help” the Chancellor.

The government is aiming for growth of 2.5 per cent – however, forecasts from Citi suggest it will average just 0.8% a year.

That, the IFS said, would mean a “fiscal tightening” of £62bn in 2026–27 to stabilise debt levels.

Even with a “big increase” of an additional 0.25 percentage points of growth every year, Mr Kwarteng would still need to find savings of approximately £40bn.

The think tank says that if government was to link the uprating of benefits to earnings at 5.5% rather than inflation at 10%, they would save just £13bn.

Cutting capital spending to 2% of national income, could save another £14bn, though the IFS point out that this “would hardly be a growth-friendly move.”

But with NHS spending protected, and Ms Truss committing to increased defence spending, the required cuts to everything else would rise to 27%.

Ben Zaranko of the IFS said other services may have to be axed altogether.

“If you want to be increasing defence by that amount, if you want to have the NHS not keel over, you are looking at cuts of more like a fifth, more like a quarter, to everything else,” he said.

“You do not do that through efficiency savings and trimming the fat. You have to say what it is the state currently does that the state is no longer going to do.”

Citi believes inflation will peak near 12% but that the Bank of England’s policy rate may peak at just 4.5%, below what markets are pricing in.

They forecast that spending power will be hit by soaring energy and food prices, with the poorest households struggling most.

Food inflation could reach 17% in early 2023.

And, they add, households could soon be hit by rising mortgage costs, as increasing numbers roll off their fixed-rate deals.

Citigroup’s chief UK economist Ben Nabarro said Mr Kwarteng’s decision to cut taxes meant the Bank of England could be forced to raise interest rates even higher than would otherwise be the case, in order to keep a lid on inflation.

“In current circumstances, the contradictory position of monetary and fiscal policy is an error,” Mr Nabarro said.

“At best we think this means bruising increases in unemployment … we see that as a prohibitively painful economic process in the medium term.”

Paul Johnson, the director of IFS, admitted it was very difficult to make forecasts about the state of the public finances given the “uncertainties about the path of the economy over the next few years.”

He said: “We project borrowing of £100bn a year in the medium term – but that could be wrong by tens of billions in either direction. 

“A credible fiscal plan will recognise that uncertainty, but cannot ignore the fact that, on a reasonable central forecast, debt is forecast to continue rising in the medium term. 

“The Chancellor has acknowledged that we should be striving to reduce it.”

However, Mr Johnson said Mr Kwarteng “should not rely on over-optimistic growth forecasts or promises of unspecified spending cuts. To do so would risk his plans lacking credibility.”