Gordon Brown yesterday slashed by a further £11bn his estimates of total North Sea revenues in the next five years - forcing up overall government borrowing projections which would otherwise have remained almost unchanged.

The Chancellor was forced into what was just the latest in a series of increases in borrowing forecasts even though, with UK economic growth currently the fastest of any Group of Seven nation, he was able to stick with predictions that domestic expansion would remain strong.

He nevertheless managed to declare he had, with £11bn to spare, met his "golden rule" of borrowing only to inance investment over an albeit-altered economic cycle. This cycle is now defined as having started in the first half of 1997, when Brown became Chancellor, and ending this month.

He said: "For the first time in four decades Britain has met the golden rule. This contrasts with the economic cycle, from 1977 to 1986, where this first fiscal rule was not met with a surplus of 11 billions, but missed with a deficit of £140bn, and in the previous cycle, from 1986 to 1997, when this golden rule was missed with a deficit of £240bn."

Mr Brown managed to cut his forecast of the deficit in the public sector finances for the 12 months to March 31 this year, on the government's favoured net borrowing measure, from the £36.8bn he projected in his December Pre-Budget Report to £35bn. He was able to do this even as he calculated North Sea revenues were likely to turn out £1.3bn lower in 2006/07 than he forecast in the PBR.

Less happily for the Chancellor, he had to raise his forecasts of public sector net borrowing for the fiscal years from 2007/08 to 2011/12 by a total of £12bn, from those made in the PBR. This was almost entirely the result of the ever more downbeat view of likely revenues from the North Sea oil and gas industry.

Mr Brown raised his 2007/08 net borrowing forecast from £31bn in the PBR to £34bn. The 2008/09 projection was increased from £27bn to £30bn and that for the following fiscal year from £26bn to £28bn. He raised his net borrowing projection for 2010/11 from £24bn to £26bn, and that for 2011/12 from £22bn to £24bn.

He cut his forecast of North Sea revenues by £2.5bn in each of the three fiscal years from 2007/08 to 2009/10, compared with PBR estimates. He reduced his prediction of the North Sea take in 2010/11 by £2bn and cut his forecast of revenues from this sector in 2011/12 by £1.5bn.

The Chancellor highlighted the North Sea issue in his speech. This may have been a defence of the public borrowing projections, but could also have been a sideswipe at the Scottish National Party, which has highlighted oil revenues as a key factor in financing an independent Scotland.

He had already, in the December PBR, cut his predictions of North revenues, by £3bn, £2bn, £1bn and £1bn respectively for the four fiscal years from 2007/08 to 2010/11, so the cumulative reduction is substantial.

He declared yesterday: "Our forecasts of the current balance (of the public finances) from 2007/08 to 2011/12 are affected by one major change in the last year - the sharply lower levels of production and yet higher costs in the North Sea - which have this year reduced tax revenues from £13bn to £8bn and for each year into the future cut them by an average of £4bn a year."

Brown was able to stick with PBR forecasts that UK economic growth, which came in at 2.7% in 2006, would accelerate this calendar year to between 2.75% and 3.25% and, although decelerating slightly, remain at or above the historic trend rate of expansion by coming in between 2.5% and 3% in both 2008 and 2009.

The UK's annual trend growth rate over the last 25 years has been about 2.5%. The Treasury has raised its estimate of future trend growth to 2.75%, with inward migration boosting the population and the economy's productive capacity.

Economists homed in on the paradox that, even though the growth outlook was particularly bright, forecasts for the public finances were deteriorating. Banking giant HSBC's UK economics team noted Mr Brown had projected 2007/08 net borrowing of only £22bn back in 2003, and this had now climbed to £34bn.

And, although he is poised to undershoot his PBR net borrowing projection for 2006/07, the Chancellor now expects to exceed his forecast of the deficit on the current budget, which excludes investment. In December, he predicted this deficit at £7.9bn, but yesterday had to raise this to £9.5bn.

Jonathan Loynes, chief European economist at consultancy Capital Economics, noted yesterday's Budget confirmed the economy would not receive the boost in the next three years that it had in the last five from rapid public spending growth. He believed this might lead to lower interest rates in the medium term. Referring to the forthcoming Comprehensive Spending Review covering the three fiscal years from 2008/09, Loynes said: "He (Mr Brown) has firmed up, for the CSR period ... a huge squeeze on the growth of public spending."