Public sector net borrowing was 4.3 billion in January, £9.6 billion higher than in January 2009. The figure brings total net debt to £848.5 billion, equivalent to 59.9% of gross domestic product.
The rise in debt - the first January increase in more than 17 years - took market watchers by surprise as tax receipts normal bump up government cash levels at the beginning of the year.
This time around though, central government receipts were 7.7% lower than a year ago while spending was 9.7% higher.
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The number of people unemployed in the UK has fallen slightly, figures from the Office for National Statistics (ONS) show.
Total unemployment stood at 2.46 million for the three months to December, down 3,000 on the figure for the previous three months. The rate of unemployment was unchanged at 7.8%.
However, the number of people claiming Jobseeker’s Allowance rose by 23,500 to 1.64 million in January, the largest increase since July last year.
The public sector is expected to suffer big cuts later this year as whichever party forms the next government will need to begin the process of reducing the UK’s £178bn budget deficit, this could spark a second round of rising unemployment.
The UK inflation rate rose to 3.5% in January (the fastest annual pace for 14 months) from 2.9% the month before, official figures have shown.
Consumer Prices Index (CPI) inflation was driven up by VAT returning to 17.5% and higher petrol prices. The Retail Prices Index (RPI) inflation which includes housing costs, rose to 3.7% in January, up from 2.4%.
Bank of England governor Mervyn King has had to write a letter of explanation to the chancellor.