The National Institute of Economic and Social Research said the economic downturn would reduce expected tax revenues by $15.72 billion. Declining home sales would also cut stamp duty revenues by 50 percent to $5.9 billion, The Independent reported.

The losses are equal to cuts of 57,000 teaching jobs or closing five hospitals, the Independent reported.

"Public finances are in this state due to overly optimistic forecasts for tax receipts, allowing the previous chancellor to go on an exuberant spending spree," said Simon Kirby, a research fellow at the NIESR.

"The government is being utterly complacent," said Liberal Democrat Treasury spokesman Vince Cable.

"A squeeze in current public spending and possibly a rise in general taxation in the medium term are not likely to be embraced warmly by government or opposition," he added. "Perhaps this is the time to face that reality."