The Chancellor faces having to raise taxes or cut spending during the impending economic downturn if he wants to avoid breaching the Treasury’s tough rules for the nation’s finances, he was told yesterday.

In the latest blow for an embattled Alistair Darling, he was warned by the Organisation for Economic Cooperation and Development that the slowing economy will send the Government’s finances £13 billion deeper into the red than planned, as tax revenues are undermined.

The OECD’s prediction threatens the Chancellor with a bleak choice between breaking the tough financial rules put in place by Gordon Brown, watering them down in a new embarrassment for the Prime Minister, or imposing higher taxes or spending cuts that could deepen the economy’s woes.

In its twice-yearly Economic Outlook, the Paris-based think-tank for rich nations’ governments forecasts that the toll from weaker growth on personal and corporate tax means that government borrowing is set to climb to 3.4 per cent of national income next year, from just under 3 per cent this year.

Compared with the Treasury’s forecast that public borrowing will fall to 2.5 per cent of GDP in 2008-09, the OECD projection implies that Mr Darling will end up £13 billion deeper in the red next year than he hoped.

The OECD report predicts a “substantial slowing in corporate and personal income tax revenues, consistent with a marked slowdown in GDP growth”.

It sounds a warning that these trends will leave the Chancellor little alternative but to raise taxes or curb public spending if he wants to meet the so-called “golden rule”. The rule requires that, over the economic cycle thought to have begun at the start of this year, all noninvestment spending by the Government is paid for out of taxes, and not by borrowing.

“The deficit is projected to rise well above 3 per cent of GDP . . . Regardless of the exact cycle dates. it is clear that a tighter fiscal policy will be required to meet the golden rule going forward,” the report concludes.

In a further blow to the Chancellor, the OECD warns that the second key rule created by Mr Brown, limiting the overall national debt to 40 per cent of GDP is also likely to be in jeopardy.