Fears that the Government's finances will be driven further into the red as the economic downturn deepens were fuelled this morning as official figures showed that the Treasury's borrowing last month was the highest for any August in 15 years.

Borrowing by the Chancellor to plug the gap between government spending and tax payments flowing into the Treasury jumped to a net £10.4 billion for last month. It was the highest August figure since 1993.

The latest rise in borrowing pushed the Government's total deficit for the first five months of the financial year up to £28.2 billion, compared with £16.5 billion for the same period last year.

City economists sounded warnings that, if this pace of deterioration in the public finances were to last for all the 2008-09 financial year, then Alistair Darling would see his borrowing hit £70 billion — far above his planned total of £43 billion.

Although that projected rise above the borrowing levels set out in the Budget is likely to be improved by future months' figures, economists believe there is now little doubt that the Treasury will slide far deeper into the red this year, and next, than it has so far planned.

Earlier this week, the National Institute of Economic and Social Research sounded a warning that the Government could be forced to cut spending by £20 billion, or raise taxes by as much as 5p in the pound, by 2011 to restore the public finances to a more sustainable state.

Today's figures also saw the Government's lending to Northern Rock finally added officially to the total for the national debt after the loan was transferred from the Bank of England to the Treasury.

This change pushed the overall debt level up to £632.7 billion, or 43.3 per cent of GDP — taking it decisively above the 40 per cent of GDP ceiling prescribed by the Treasury's fiscal rules put in place by Gordon Brown.

However, the Treasury has repeatedly insisted that, since public support is intended to be temporary, this should not be counted as a breach of the 40 per cent of GDP ceiling under the sustainable investment rule set out in its financial regime.

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