Tough nuts

22 March 2011 By Ian Campbell

On budget eve, data shows how bad the UK economy is. Inflation is 4.4 percent; February borrowing is the worst on record. But consumers are reeling. The government must stick to deficitcutting but toughness for the Bank of England means holding fire on interest rates.

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The UK's Office for National Statistics (ONS) reported that consumer price inflation rose to 4.4 percent in February from 4 percent in January, higher than the 4.2 percent forecast by economists.

Transport prices contributed 1.3 percentage points of the overall 4.4 percent rate. Prices for fuels and lubricants have risen by 15.9 percent over the 12 months to February, according to the ONS. A measure of the consumer price inflation index that excludes the influence of changes in indirect taxes such as VAT rose to 2.8 percent in February, from 2.4 percent in January.

The ONS also reported on the public finances in February. The Public Sector Net Borrowing Requirement excluding financial interventions rose unexpectedly sharply to 11.8 billion pounds last month, the largest February deficit on record. There was a deficit of 9.5 billion pounds in February 2010.

Tax receipts were 1 percent lower in February than a year earlier. However, the government still seems likely to do better than its 2010/11 fiscal year target of 149 billion pounds for the PSNBR.

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