Chancellor Alistair Darling has warned his Cabinet colleagues not to expect any more money for schools, hospitals or transport.
He said people were feeling "squeezed" by rising prices and would not tolerate higher taxes for public services.
He told the Times newspaper that he did not believe there would be a swift improvement in the economy.
The Tories said his hint that borrowing rules might be relaxed dealt a fatal blow to the government's reputation.
Period of uncertainty
Mr Darling told the newspaper that ministers who ask for more cash will get a very short reply.
He also suggested that bringing burgeoning public borrowing under control would be politically unacceptable BBC NEWS | Politics | Darling: Public feel 'squeezed'
Well, with GDP falling as we go into recession, I fail to see how Guuurdun's 40% public borrowing rule can carry any water, it's cloud cuckoo land. If what we're told is correct, GDP for 2007 was about 1 trillion pounds, therefore if public debt is about 40% then the country owes about £400bn. All they've done with this money is buy jobs that we all have to pay for.