Taxpayers are at the limit of what they are willing to pay to fund public services, the Chancellor has said in an interview with The Times.

In his gloomiest assessment yet of the state of the British economy, Alistair Darling gave warning that the downturn was far more profound than he had thought and could last for years rather than months.

He revealed that he told Cabinet ministers this week that there would be no more money for schools, hospitals, defence, transport or policing.

He confirmed that the Treasury was considering revising its fiscal rules to allow more borrowing to deal with the economic problems. He said that he did not believe that voters, already struggling with higher food and fuel bills, would be willing to pay more tax.

“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 between how much you can spend and how much people will say, ‘OK, if you’ve got another pound to spend remember me as well’.”

His disclosure came as latest figures showed that public borrowing rose by £9.2 billion last month, well above City forecasts of £7 billion and the highest for June since 1993, when monthly records began. Borrowing of £24.4 billion between April and June was a postwar quarterly record.

Jonathan Loynes, chief European economist at Capital Economics, predicted that public borrowing would reach £57 billion this year, £15 billion higher than the Budget forecast.

Mr Darling said of this week’s Cabinet meeting: “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.”

The Chancellor also disclosed that to cheer himself up this week he went to a concert given by his musical hero, Leonard Cohen, whose songs are regarded as hauntingly depressing even by fans.

Laying bare for the first time the Government’s assessment of the scale of the downturn, he said that Britain could still be suffering by the next election, expected in 2010.

“At Christmas most people remained hopeful there would be an improvement by the autumn,” he said. “Most people would now say it’s far more profound. It’s affecting every economy and everybody. I can’t say how long it will last.”

He has already downgraded his growth forecasts twice, but he cautioned yesterday that the true picture was “at the bottom end of my range” set out in the last Budget.

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