GORDON BROWN’S plans for the nation’s finances tumbled even more sharply into the red yesterday as he startled the City with much steeper increases in future government borrowing than economists had predicted.

The Chancellor’s announcents followed a pattern that has become familiar to those who track his forecasts closely.

Yesterday marked the seventh Pre-Budget or Budget statement in a row in which Mr Brown has been forced to increase his forecasts for the Government’s deficit as expected revenues fall short of his hopes. Yet the scale of these latest increases in borrowing nevertheless provoked surprise.

Mr Brown also drew flak from analysts as again he rejigged calculations of his “golden rule” for the public finances, flattering the numbers in a way that showed him meeting the strictures with greater leeway, even in the face of the deterioration otherwise seen in the Treasury’s books.

In yesterday’s projections Mr Brown raised his forecasts for borrowing over the five years from 2005-06 to 2009-10 by a total of £17 billion.

In the present financial year he now intends to borrow £37 billion, £5 billion more than he previously planned. The deficit for 2006-07 is also now set to be £5 billion higher than anticipated, at £34 billion.

This overshoot in borrowing comes despite the modest tax increases that the Chancellor announced, which will raise about £2 billion extra in revenues a year, largely by tapping North Sea oil companies.

The measure of borrowing that feeds into estimates of the Treasury’s compliance with the golden rule, the current budget deficit, which strips out investment spending, also showed a marked worsening of a cumulative £20 billion over the years to 2010 compared, with the March plans.

Economists were left bemused that despite this Mr Brown was able to calculate that he was meeting his golden rule — which requires that he borrow only to fund investment — by an increased margin of £16 billion, compared with the £6 billion that he reported in the spring.

The explanation for this was that after his rejig to calculations of the rule in the summer, which improved the figures by adding two extra years at the start of the present economic cycle, Mr Brown now also expects this to run for three years longer than previously estimated, further benefiting the numbers.

The present cycle is now judged to run for 12 years from 1997 to 2008-09 — a remarkably long period. The Treasury was able to use the present weakness of growth to justify stretching the cycle since this should be judged to have ended only when the economy is again expanding at its trend rate of 2.75 per cent.

But economists said the latest tinkering with the calculation would further damage the golden rule’s credibility. “Once again we see just how flexible the interpretation of the fiscal rules are,” John Butler, of HSBC, said.

The increased overall borrowing forecast by the Chancellor came as tax revenues continued to increase less rapidly than he planned. The Treasury now expects overall revenue to rise by 7.6 per cent in 2005-06 compared with the previous financial year. This is down from the 8.5 per cent projected in the March Budget.

After yesterday’s limited tax rises, the overall tax burden is now slated to have risen by 2 per cent of GDP between 2004-05 to 2007-08, reaching some 38.5 per cent, the highest since the mid-1980s.

Yet despite the clear strains on the public finances shown by burgeoning deficits, analysts said future tax increases were by no means a foregone conclusion, with Mr Brown seemingly content to let borrowing to take the strain.

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