More tax rises and welfare cuts are “on the cards” in the three years after the 2015 general election to fill a £27 billion gap in the Government’s budgets, a respected economic think-tank warned last night.

The Institute for Fiscal Studies said it was “close to inconceivable” that further tax hikes and benefit cuts could be avoided, after forecasts in Wednesday’s mini-budget that sluggish growth will leave the economy 3.6 per cent smaller in 2016/17 than was expected only nine months ago.

Meanwhile, the political fall-out continued with Bradford South Labour MP Gerry Sutcliffe branding the mini-budget “inept and unfair” and his party accusing Chancellor George Osborne of targeting new mothers with a £180 “mummy tax”.

The Chancellor’s decision to impose a one per cent cap on rises in maternity pay over the next three years will hit women who take time off work after giving birth, said Yvette Cooper, who is responsible for equalities.

And there were concerns over whether the Chancellor’s failure to hit his target on debt – exposed by the independent Office for Budget Responsibility – will harm Britain’s credit rating. Ratings agency Fitch said it expected that by 2015 debt will be “approaching the upper limit” consistent with retaining the AAA status.

In a round of broadcast interviews yesterday, Mr Osborne conceded that losing the gold-standard rating would be a blow, but insisted that international investors continue to regard Britain as “a good investment”.

The UK’s historically-low interest rates showed that “the world has confidence in us... the calls we have made as a Government have been absolutely right”, said the Chancellor.

The Bank of England yesterday maintained the record low 0.5 per cent base rate for a further month.

But economist Andrew Lilico said a downgrade, which is likely to increase the cost of Government borrowing, was possible and would be a “political humiliation” for the Chancellor, who had invited voters to judge him on his ability to retain AAA status.

Shadow chancellor Ed Balls said Mr Osborne was borrowing £200 billion more than he predicted two years ago.

And he said his decision to cap benefit rises at one per cent demonstrated that he was not protecting low and middle-income families.

Labour calculates that a single-earner family on £20,000 with two children losing £279 a year from April as a result of the mini-budget changes.

Mr Sutcliffe said: “George Osborne is pressing ahead with a £3 billion tax cut for the highest earners in the country – worth an average of £107,000 for 8,000 people earning over £1 million.

“Yet at the same time, people on low and middle incomes are being hit hard with higher VAT, the granny tax, and real-terms cuts to tax credits, jobseekers allowance, maternity pay and child benefit.”

While admitting life was difficult for many because of the economic climate, Keighley Conservative MP Kris Hopkins praised the Government’s handling of the downturn.

He said: “As a result of this carefully thought through series of initiatives from the Chancellor, I am confident that we are moving steadily towards a much more positive future.”

The Chancellor’s measures have also been broadly welcomed by business leaders in Bradford.

Stephen Wright, president of Bradford Chamber of Commerce, said: “Extending the period of austerity to 2018 is not pleasant news, but we like the sound of some of the measures. Cancelling the planned fuel tax rise was called for, although we thought it might only be postponed. Reducing corporation tax by a further one per cent is very warmly welcomed, and that will help with business planning and forecasting.

“We’ve also been calling for a reinstatement of rate relief for empty properties and so we’re pleased that there’s been some shift here – although it’s disappointing it’s only new-builds and not all empty premises; but at least it should encourage more house-building and support the construction sector.”