British public borrowing spiked to its highest since records began more than 60 years ago in 2008/9 and unemployment hit its worst in more than 11 years, setting a grim backdrop to Wednesday's annual budget.
Official data showed public sector net borrowing for the tax year just ended totalled almost 90 billion pounds ($131 billion), more than 10 billion pounds above finance minister Alistair Darling's November forecast and the highest reading for any year since records began in 1946/47.
"This suggests that the Chancellor will be unveiling some truly terrible estimates for borrowing this year and next, which will keep bond markets very nervous," said James Knightley, economist at ING Economics.
Investors, already spooked by the prospect of hefty upwards revisions to the government's borrowing forecasts, pushed gilt futures lower and the pound fell against the dollar.
The Office for National Statistics also said total UK unemployment jumped by 177,000 in the three months to February, the biggest rise since 1991. That took the level to 2.1 million, the highest since Labour's landslide election win in 1997.
However, the number of people claiming unemployment benefits rose much less than expected in March, up 73,700 after February's record 136,600 jump. Analysts had forecast a rise of 120,000.
"I don't think we've hit the bottom yet in terms of unemployment," employment minister Tony McNulty told Sky television.
Darling is expected to announce a two billion pound package aimed at preventing school and university leavers from joining the dole queue and boosting services for the unemployed.
Britain's housing market, pivotal to the economy, also shows little sign of recovering.
British gross mortgage lending fell 52 percent year on year to an estimated 11.5 billion pounds in March, the Council of Mortgage Lenders said on Wednesday.
FISCAL CONSTRAINTS
The government's ability to kick-start Britain's recession-hit economy with further large-scale fiscal stimulus is limited by the sharp deterioration in the public finances.
Public sector net borrowing was more than 19 billion pounds in March alone, the highest for any month on record and well above the 16.15 billion pounds forecast by analysts.
The cash-based measure of borrowing was almost double forecasts at more than 28 billion pounds in March — also a record.
Weak wages data also caught analysts' attention. Average earnings including bonuses fell 2.1 percent on a year ago in February, the biggest drop since records began in 1991.
"This is further evidence that bonuses this year have been non-existent," said Alan Clarke at BNP Paribas.
Separately, minutes to this month's Bank of England policy meeting showed all nine policymakers voted to keep interest rates at the record low of 0.5 percent and to press on with quantitative easing to revive the economy by boosting money supply.
"Overall, the risks to the domestic economy remained weighted to the downside," the minutes said.
The economy shrank by 1.6 percent in the final quarter of 2008 — the fastest pace of decline since the early 1980s.
