Chancellor calls a halt to spending

10:36pm Saturday 19th July 2008

Cabinet ministers have been warned there will be no more money for public services, as taxpayers are reaching the limits of what they are willing to pay, Chancellor Alistair Darling said.

Mr Darling acknowledged that British workers were feeling "squeezed" and revealed he told colleagues at this week's meeting of Cabinet not to ask for budget increases for services like schools, hospitals, transport and defence.

In a gloomy assessment of the state of the economy, Mr Darling said that conditions would be difficult "for quite some time" and he did not know when they would improve.

But, speaking to The Times newspaper, the Chancellor gave a clear hint that tax rises were off the agenda for the foreseeable future.

"People will pay their fair share but you can't push that," he said. "My judgment at the moment is that there are a lot of people in this country who feel they work hard, they make their contribution and they're feeling squeezed. Every Chancellor has to be very conscious of the fact that there's a balance to be struck."

And he added: "I've been very clear with my colleagues that there is no point them writing in saying 'Can we have some more money?' because the reply is already on its way and it's a very short reply.

"I told them at the last meeting of Cabinet they've got to manage within the money they've got."

Mr Darling was speaking amid widespread speculation that a Treasury review of the Government's fiscal rules will result in them being loosened in order to allow more borrowing.

Following official figures showing that net borrowing hit a record £24.4 billion in the first quarter of the financial year, analysts said that the sustainable investment rule must be relaxed if the Government is to avoid tax increases or spending cuts.

Figures from the Office for National Statistics showed net debt at 38.3% of GDP - up one percentage point on a year ago - bringing it perilously close to the 40% limit imposed by the rule.

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