Belfast Telegraph

UK deficit worsens as inflation jumps to 4.4%

George Osborne was yesterday given a double whammy of economic bad news as he put the final touches to his second Budget as Chancellor.

On the eve of today's statement, official statistics showed inflation rising to a two-year high of 4.4% while borrowing spiked upwards to £11.8bn in February, diminishing hopes of a significant undershoot on the Government's target of £148.5bn for the financial year.

The combination of higher inflation and increased borrowing is likely to cast a pall over what Mr Osborne has sought to present as a "Budget for growth".

The Office for Budget Responsibility is widely expected to downgrade its prediction of GDP growth in 2011 from 2.1% to around 1.8%, as well as revising its borrowing forecasts upwards.

And an international survey suggested that Mr Osborne will have his work cut out to dispel public gloom about the economy.

The Ipsos MORI Global Advisor poll of 24 countries found just 12% of Britons rating the state of the economy as "good" and 11% expecting it to strengthen over the next six months - more pessimistic than anyone except the French and Japanese.

By contrast, 64% of Germans and 66% of Canadians thought their economies were doing well and 73% of Brazilians and 61% of Indians expected to see improvement in the coming months.

Mr Osborne has cast the Budget as the moment the Government moves "from rescue to reform", building on the deficit-reduction measures of 2010 with a business-friendly package to boost jobs.

He has promised the public will not be asked to swallow further tax hikes or spending cuts, insisting that last year's £81bn package will wipe out Britain's deficit by the end of the Parliament.

He has dismissed Labour's call for a Plan B of slower and gentler cuts, which he insists would be "a huge mistake" and risk shattering market confidence in the UK.

Expectations are mounting in Westminster that Mr Osborne will use the statement to float a controversial proposal to merge income tax and national insurance.

Motorists are hopeful that the Chancellor will scrap - or at least postpone - the 1p hike in fuel duty scheduled by Labour predecessor Alistair Darling for April 1.

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