Higher inflation, higher government borrowing costs and pressures on public services will be the key challenges faced by the Chancellor at the Budget.

Conflict in the Middle East and the subsequent energy price shock will squeeze households and make the economic backdrop to the Budget more difficult.

UK government borrowing costs are high, but recent rises reflect global factors and the attention of the bond markets is currently elsewhere.

HM Treasury is covering losses as the Bank of England unwinds QE. Recent economic and policy changes affect the scale of losses in the near term.