Opposition parties have said Gordon Brown had "lost control" of the economy after it was reported the Treasury was rewriting his fiscal rules to allow the Government to increase borrowing.

Officials were drafting a looser framework, the Financial Times said, so that the Treasury would not have to break the present borrowing limit of 40% of national income.

The rules were laid down by Mr Brown as Chancellor as soon as Labour came to power in 1997 in an effort to assure the party's reputation for economic competence.

But with the Government predicted to face a £8 billion tax revenue shortfall because of the economic downturn, they appear set to be breached soon.

Liberal Democrat Treasury spokesman Vince Cable said policy should be be put in the hands of an independent body to stop the Government "fiddling" the figures.

"The fiscal rules have no credibility when the Government keeps fiddling or changing them," he said. "This step underlines what I and my colleagues have said for years, the assessment of fiscal policy must be made by an independent body in the same way interest rates are determined.

"It's completely lacking credibility for the Treasury to be marking its own exam papers and setting its own questions. What we need is an Ofsted for the economy."

A Conservative Party spokesman said: "If this is true, it puts the final nail in the coffin of Gordon Brown's reputation for economic competence.

"He repeatedly staked that reputation on his fiscal rules, and now we're told that the Treasury is having to re-write the rules because the Government has lost control of the public finances".

A Treasury spokesman said the story was "pure speculation" and based on old information.

"We have made consistently clear (for some time now) that we will set out the fiscal rules for the next economic cycle at the end of the current cycle," he said.

The so-called sustainable investment rule sets 40% as the limit "over the current economic cycle" - the definition of which has already been revised by the Treasury.

It is expected that the Treasury will declare the cycle over after the Office for National Statistics publishes its revisions to the national accounts, expected in October.

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