The warning has come from the highly respected think-tank, the Institute for Fiscal Studies (IFS), which said it was "close to inconceivable" that such austerity measures could be avoided after forecasts in the Chancellor's Autumn Statement showed sluggish growth would leave the UK economy 3.6% smaller in 2016/17 than was expected just nine months ago.
In the fall-out from Wednesday's gloomy mini-Budget, doubts were also raised about Britain keeping its Triple A credit rating after the agency Fitch said it expected by 2015 that debt would be approaching the upper limit consistent with retaining the coveted status.
However, Danny Alexander, Chief Secretary to the Treasury, brushed aside the warning, saying he did not regard credit rating agencies "as the be-all and end-all of this".
He explained: "What matters is the judgment the markets and the people who buy our debt to support our deficit make about the credibility of this country. The test I apply is not what some external organisation is going to say about the UK, but whether we have got the right measures to ensure we continue to have that credibility."
George Osborne echoed the sentiment and insisted international investors continued to regard Britain as "a good investment". But economist Andrew Lilico said a downgrade, which was likely to increase the cost of Government borrowing, was possible and would be a "political humiliation" for the Chancellor.
In its assessment, the IFS said the figures in the Autumn Statement suggested that in the three years to 2017/18 those Whitehall departments unprotected from the cuts would face cumulative reductions totalling 16% in the absence of either welfare reductions and tax rises or if the Chancellor took the politically difficult decision to allow hospitals, schools and pensions to take some of the pain.
This, it said, would mean an overall squeeze of more than 31% of the budgets of these departments since the Coalition came to power in 2010.
"That begins to look close to inconceivable," said IFS director Paul Johnson. "Further welfare cuts and tax rises must be on the cards – £27bn-worth would be required to protect other spending in real terms entirely."
Mr Johnson added the planned below-inflation 1% rise in the threshold for the 40p rate of income tax would drag another million workers into the higher-rate by 2015. By that point the 40p rate would be paid by more than five million people – more than double the level in the 1990s – and would no longer be the preserve of a "highly paid few".
Mr Osborne has denied Labour accusations that he had used "Del Boy economics" over the official deficit forecasts.
Shadow Commons Leader Angela Eagle said the inclusion of the expected 4G windfall, which had lowered borrowing this year, was an attempt by the Chancellor to "hide his failure".
Earlier, Ed Balls sought to downplay what some regarded as a poor performance at the Commons despatch box on Wednesday, saying he would not apologise for his stammer.
The Shadow Chancellor said his condition sometimes "got the better of him" in Parliament, but pundits claimed he had been thrown by the figures which showed borrowing would fall this year."
Mr Osborne said Mr Balls got a hard time from Tory MPs not because of his stammer, but because he had been Gordon Brown's economic adviser "when it all went wrong and he never acknowledges that".