A key element of the UK Government's claims of economic competence is at risk of crumbling as Chancellor Alistair Darling considers breaking one of the "golden rules" on borrowing levels.

Facing grim economic times and already close to the self-imposed ceiling set for government borrowing of 40% of national income, Mr Darling said yesterday the fiscal rules are now "under review", although he suggested a report that looser rules are already being drafted was "pure speculation".

He insisted no decision has been taken on whether the fiscal rules can be relaxed to allow more borrowing.

Official figures yesterday showed net borrowing hit a record £24.4bn in the first quarter of the financial year.

Balancing the nation's books requires that ministers choose between raising tax, breaking the rules or rewriting them.

Conservatives warned the change would mean "the end of the Brown era of economics", with Shadow Chancellor George Osborne saying the rules were being ditched as soon as economic difficulties put Labour to the test.

When he was chancellor, Gordon Brown staked his credibility on the rules when he announced them in 1997.

They were the key elements of the financial constraints he imposed on himself in order to build his reputation for prudence and competence.

Today's figures from the Office for National Statistics showed net debt at 38.3% of gross domestic product, up one percentage point on a year ago.

Including the government's added exposure from having taken over Northern Rock, plus the Bank of England credit line to avoid a stalling of bank lending, the ratio of borrowing goes up to 44.2%.

As growth stalls and the UK economy risks recession, that proportion could rise sharply, particularly if rising unemployment and welfare costs increase government costs.

That would break another of the golden rules, requiring that Mr Darling only borrows money to invest. But to depend either on tax increases or spending cuts to avoid breaking the rules would be likely to worsen the economic downturn.

Quarterly net borrowing was £9.6bn higher than the equivalent period last year, after a figure of £9.2bn was recorded for last month alone - the highest for June since monthly records began in 1993.

In a BBC interview yesterday, Mr Darling hinted at a rethink by pointing out government borrowing levels in Britain were currently lower than in most other major economies, including France, Germany, Italy and the US.

He added: "Of course it is right - especially now when our economy along with every other economy in the world is being hit by two shocks, the credit crunch and very high oil prices - that we allow borrowing to support the economy.

"But what is critical is that you do have rules to ensure public finances are sustain-able in the medium term. That is why rules are so important now and why they will remain important in the future."

Mr Osborne said: "The Brown era of economics is over. He staked his credibility on the fiscal rules. They were part of the arrangement he announced a decade ago to constrain government and make sure that money was put aside in the good years to prepare for the bad years.

"Now we've reached those bad years, the public finances are in a mess, and the rules are being ditched. It's like giving the prisoner the keys to their own prison cell."

Liberal Democrat Treasury spokesman Vince Cable said the rules should 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 changing them," he added.

Robert Chote, director of the Institute for Fiscal Studies, said: "The government would perhaps have been better off rethinking how these rules should look rather before the point at which it looks as though you are just about to break them."