The public finances are heading for the rocks, according to City economists, after new official statistics revealed Labour's biggest monthly budget deficit since it came into power.

Public Sector Net Borrowing came in at £10.2 billion in March, significantly overshooting the consensus forecast of £7.8 billion and the biggest deficit since the Office for National Statistics started keeping the figures in 1993.

Economists today warned the Treasury has not readied itself for a slowdown in the UK economy at a time when more tax increases to raise money are off the political agenda ahead of a general election no later than May 2010.

"The public finances are significantly weaker than a year ago," said top economist Howard Archer at Global Insight.

"Darling looks increasingly unlikely to to be able to achieve his fiscal targets for 2008-9 given the deteriorating economic outlook.

"Markedly weaker growth than the Government expects will undermine VAT and corporation tax receipts while sharply reduced housing market transactions and lower house prices will hit stamp duty receipts."

Paul Dales of Capital Economics said: "We think a sharper economic slowdown will mean that borrowing overshoots Darling's forecast of £43 billion for 2008-9 by at least £2 billion."