Confirmation that tax revenues are faltering as the economic downturn worsens sparked fresh warnings from the City today that government finances are set to slide far deeper into the red than the Chancellor Alistair Darling has forecast.

Worries over the frail state of the public finances were fuelled as official figures showed the Treasury’s net borrowing in the first four months of the financial year, from April to July, soared to £19.1 billion — up from £10.7 billion in the same period last year.

Concern that the Treasury is in an increasingly precarious financial position was scarcely eased as the figures showed that it was in the black in July alone by more than the City expected, thanks to bumper receipts from North Sea oil.

The net surplus on the public finances for last month totalled £4.8 billion but this was sharply lower than the £6.4 billion surplus registered a year ago, the Office for National Statistics reported.

Economists said that the underlying deterioration in the public finances was emphasised as tax revenues rose by only 2.9 per cent in the financial year to date compared with the same period last year.

The Chancellor has factored in a 4.8 per cent rise in tax receipts for the full year.

Income tax revenues were particularly weak last month, with their growth rate halving.

At the same time, government spending is running faster than planned, rising by 7 per cent or more in the 2008-09 financial year, compared with the Treasury's full-year forecast for a rise of about 5.3 per cent.

Spending is being boosted by the rising cost of paying unemployment benefits as the jobless total starts to climb.

Economists said that, on present trends, net borrowing for the full year could soar to between £50 billion and £65 billion, compared with the Chancellor’s £43 billion forecast.

“The full-year figures are going to be significantly worse than the Chancellor’s forecast,” Jonathan Loynes, of Capital Economics, said.

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