CABINET MINISTERS have been warned there will be no more money for public services, as taxpayers are reaching the limits of what they are willing to pay, chancellor Alistair Darling has said.

Darling acknowledged that British workers were feeling "squeezed" and revealed he told colleagues at this week's meeting of Cabinet not to ask for budget increases for services such as schools, hospitals, transport and defence.

In a gloomy assessment of the state of the economy, Darling said that conditions would be difficult "for quite some time" and he did not know when they would improve.

In a wide-ranging interview, the chancellor gave a clear hint tax rises were off the agenda for the foreseeable future.

"People will pay their fair share but you can't push that," he said. "My judgement 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 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'."

And he added: "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."

Darling was speaking amid widespread speculation that a Treasury review of the government's fiscal rules will result in them being loosened in order to allow more borrowing.

Following official figures showing that net borrowing hit a record £24.4 billion in the first quarter of the financial year, analysts said that the sustainable investment rule must be relaxed if the government is to avoid tax increases or spending cuts.

Figures from the Office for National Statistics showed net debt at 38.3% of GDP - up one percentage point on a year ago - bringing it perilously close to the 40% limit imposed by the rule.

Darling acknowledged that the prospects for a swift improvement in the global economic situation were fading.

"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.

"We are going through a very, very difficult time. You have the twin effect of the credit crunch and very high oil prices. That means the economic news is going to be difficult for quite some time."

Liberal Democrat Treasury spokesman Vince Cable said: "People have reached a limit in their willingness to pay tax, and consequently public spending must be restrained.

"But ministers must not simply lop off the easiest bits of their spending commitments. Instead, the government needs to be very clear in setting its priorities for spending.

"This should include taking an axe to public-sector bureaucracy, in particular the highly-paid managers who occupy lucrative positions in quango land."