What changed
UK inflation reached 3.5%, national debt passed £3 trillion, and government borrowing is running above forecasts as spending and interest costs rise. John Healey is preparing next week’s Budget while energy costs push headline inflation higher and underlying pressures begin to spread beyond fuel.
The State Pension is due to rise by 3.9% next April under the Triple Lock. Welfare payments will also be uprated, while frozen tax thresholds may increase cash tax receipts.
Why it matters
The figures narrow the room for giveaways. Higher inflation can offer the Treasury more tax revenue in cash terms, but it also makes public services more expensive and could strengthen union demands for higher pay.
For households, the pressure is uneven. Food-price inflation has remained largely untouched by the energy shock, but petrol and diesel costs have surged, and prices for services including airfares and computer-game downloads are showing signs of becoming stickier.
The outlook is that inflation could move towards 4% in the coming months. If services and core inflation remain elevated, the Bank of England may be more likely to raise interest rates next month, making borrowing more expensive for households and the government alike.
The approval of the Jackdaw gas field signals a pro-growth direction before the Budget, but its financial effect has not been quantified. It does not remove the central trade-off: offering consumers breathing space while convincing markets that borrowing can still be brought under control.
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