A significant decrease in government borrowing was reported for December, according to the latest figures.
In a striking development, the UK government saw its borrowing plunge last month, predominantly due to increased tax revenue and elevated National Insurance contributions that outpaced public spending. The Office for National Statistics (ONS) revealed that the borrowing figure for December stood at £11.6 billion, reflecting a decline of £7.1 billion or 38% compared to the same month in the previous year. While this drop was unexpected by many economists and lower than anticipated, it still exceeded the borrowing amount recorded in December 2023.
Tom Davies, who serves as the Deputy Director for the ONS public service division, explained that this reduction in borrowing stems from "receipts being up strongly on last year whereas spending is only modestly higher."
Yet, despite the drop in borrowing, the £11.6 billion figure for December 2025 marks the tenth highest borrowing level recorded for that month since records began in 1993, not accounting for inflation. It remains above the borrowing figure of £8.1 billion from December 2023.
The statistics indicate that the government's tax intake was £7.7 billion higher—a notable increase of 8.9%—in December 2025 when compared to the same month in 2024. This surge was driven by rises in various taxes, including income tax, corporation tax, VAT, and National Insurance contributions. Notably, changes to the rate of National Insurance paid by employers took effect in April of the previous year.
Moreover, public spending for December also saw an increase, partially attributed to inflation-linked benefits. This spending was provisionally estimated at £92.9 billion, which is £3.2 billion or 3.5% more than the expenditure in December 2024. However, this rise in public spending was more than compensated for by the increases in tax revenue and National Insurance contributions.
Preliminary estimates suggest that total borrowing for the financial year up to December reached £140.4 billion, approximately £300 million less than during the same timeframe in 2024, as reported by the ONS. This borrowing level represented 4.6% of GDP, indicating a slight decrease of 0.2 percentage points compared to last year.
This borrowing amount ranks as the third-highest for the period from April to December, following the years 2020 and 2024. James Murray, the Chief Secretary to the Treasury, remarked on the government’s efforts towards "stabilising the economy, reducing borrowing, and addressing waste within the public sector." He further stated, "Last year we doubled our headroom, and we are projected to reduce borrowing more than any other G7 nation, with this year’s borrowing expected to be the lowest since prior to the pandemic."
Ruth Gregory, the deputy chief UK economist at Capital Economics, mentioned that there are finally signs of improvement in the public finances in recent months. She predicted an even stronger performance in January, anticipating robust self-assessment tax and capital gains tax receipts due to the freeze on income tax thresholds and potential asset disposals stemming from speculation regarding upcoming capital gains tax adjustments.
However, she cautioned that the overall trend indicates a slow pace of deficit reduction.
