The government was accused today of taking a chainsaw to public spending "above and beyond" what was needed after figures showed the cuts would turn Britain's underlying deficit into a surplus by 2015.
In its post-budget analysis, the Institute for Fiscal Studies said George Osborne's cuts would total more than the 5.9% of national income needed to wipe out the structural deficit – the part that remains even when growth returns.
While Labour planned to reduce the structural deficit by about 75% over the life of this parliament, the coalition government will take that figure above 110%.
The thinktank also criticised changes to business taxation, saying the decision to cut corporation tax at the expense of investment allowances "favoured supermarkets over manufacturers".
Labour said Osborne had used the budget to pursue an ideological agenda to reduce the size of the state. Unions said they would fight the cuts, which they argued went beyond anything demanded by the international community or bond investors, and would plunge the economy back into recession.
Warning of huge job losses, the GMB's national officer, Brian Strutton, said: "The true picture is far bleaker than George Osborne is telling the country and it is because he is cutting too far and too fast, more than the economy can cope with."
The IFS said some departments could see their spending slashed by a third – with the Home Office, justice, transport, housing and higher education possibly losing out. The squeeze over five years would be the equivalent of scrapping 38 universities and the closure of dozens of courts.
Robert Chote, the IFS's director, said the government was relying on spending cuts to make up 77% of the reduction, which went beyond anything considered by previous governments. "The government is clearly relying more than Labour said it would have done on spending cuts and also much more than the last Conservative government to confront a similar repair job did," Chote said.
"The Clarke and Lamont budgets of 1993 aimed for a roughly 50/50 split between spending and tax."
Gemma Tatlow, an economist at the IFS, said cuts would take the UK back to the levels of spending in 2003 "but with taxes as we had in 2007". She said the plan to reduce spending in every year of the parliament was unprecedented and pointed to figures for annual spending since 1950 that showed only two periods when governments managed two consecutive years of cuts. "Six years of cuts are part of the plan but this has never been achieved by any government," she said.
Osborne's measures to cut the deficit comprise 85% spending cuts and 15% tax increases which, when added to Labour's existing package, bring the overall reliance on a spending squeeze to 77%.
According to the Office for Budget Responsibility, which Osborne created to judge the effects of government policy on growth, the structural deficit was now bigger than the estimate used by Labour.
Osborne has been criticised for focusing on reducing government expenditure at the expense of elements designed to boost growth. He included a range of tax cuts for business, which he said would spur private sector growth.
The IFS said the phased four percentage point cut in corporation tax from 28% to 24% was welcome and would take Britain from above the OECD average of corporation tax rates among rich nations to below the average.
While companies will enjoy a lower rate than counterparts in Norway, Italy, Sweden and the Netherlands for the first time, the rate will still be higher than Switzerland, Poland, Iceland and Ireland. Germany currently taxes companies at 30%, while France levies a 34% rate and Japan and the US almost 40%.
But the IFS warned that a cut in investment reliefs skewed the package towards those companies able to retain a high level of profits and to invest only a small proportion of surplus funds in plant and machinery.
"The biggest benefits of corporation tax cuts goes to those companies that have high profits to offset against the tax and little investment in plant and machinery. So it is a policy you can say favours supermarkets over manufacturers," it said.
Osborne said allowances for investments in plant and machinery would decline from 20% to 18% from 2012. The annual investment allowance would decline from £100,000 to £25,000 from 2012. The combined saving in allowances will be £2.8bn offsetting the corporation tax giveaway of £3.6bn and £1.4bn from a cut in the tax paid by smaller companies from 21% to 20%.
Labour said the package undermined government claims to be rebalancing the economy in favour of areas such as manufacturing. Industries such as pharmaceuticals, which have long taken advantage of investment relief, are expected to be hard hit by the changes. The Engineering Employers' Federation argued that scrapping a large proportion of existing reliefs would hit manufacturers hard.
The IFS said: "Cutting capital allowances is not a good way to raise money because they are an efficient way to promote investment."
The IFS also attacked plans to offer an exemption from national insurance contributions for small companies.
The one-year tax break for the first 10 employees hired for business outside London, the south-east and eastern England can save up to a maximum £5,000 per employee.
"Why is this policy favouring start-ups over existing companies? If it is a good policy then why shouldn't all small companies benefit. Why only certain regions and why only temporary?" the IFS asked.
"To our mind it is complicated and open to abuse by firms looking to save money through tax. The only good thing you can say about it that it won't last that long and won't, because it is relatively small amounts of money, do that much damage."