LONDON (Bloomberg) — Britain's government budget deficit may rise by £32 billion ($48 billion) more than the level forecast in November as the recession deepens, the Institute for Fiscal Studies said.

The shortfall of £150 billion would amount to 10.4 percent of gross domestic product in the fiscal year through March 2010 and force Chancellor of the Exchequer Alistair Darling to consider tax increases and spending cuts after the next election, the IFS said.

"The recession is now expected to be deeper and longer than the Treasury anticipates," according to the IFS, a research group that counts the Treasury and Bank of England among its clients. That will "depress tax revenues and increase welfare bills" and will "require an additional fiscal tightening" once growth rebounds.

Deteriorating finances limit Prime Minister Gordon Brown's ability to stimulate the economy with spending or tax cuts before the middle of 2010, the deadline for the government to call a vote. Darling, who delivers his annual budget on April 22, has acknowledged the recession is worse than he expected.

"There is no doubt the depth of this recession, here and across the world, is far greater than people were predicting last year," Darling said on Sunday on the BBC's "Andrew Marr Show".

The economy will shrink 2.8 percent this year, the biggest contraction among the Group of Seven nations, according to the International Monetary Fund. That compares with declines of 2.6 percent in Japan, two percent in the euro area, 1.6 percent in the US and 1.2 percent in Canada.

Britain's Conservative opposition seized on Darling's remarks and the IFS figures to amplify their criticism that the Labour government borrowed and spent too much before the recession began, limiting its room for manoeuvre in the crisis.

"Budget day looks like being the day when Labour's failures are finally laid bare," said George Osborne, a lawmaker who speaks on the economy for the Conservatives.

Darling began indicating last month that he won't embark on a new round of fiscal stimulus as the Treasury failed to attract enough investors for an auction of 40-year government bonds and Bank of England Governor Mervyn King warned that ministers should be mindful of keeping the deficit under control.

To keep government debt from spiralling, Brown or his successor will need to raise taxes or cut spending by about £40 billion pounds more than planned next year, the IFS said.

The institute now expects the UK's stock of debt to rise to 71 percent of GDP by fiscal 2011, including some cost to the government of its more than £1 trillion in credit guarantees to UK banks. Darling's November forecast was for debt to stand at 56 percent of output in 2011.