Government borrowing falls by more than a third in December
Government borrowing in the UK fell significantly last month as increases in tax revenues outpaced spending, official figures show.
The Office for National Statistics (ONS) said government borrowing (the difference between public spending and tax revenue) in December was £11.6bn.
It was down £7.1bn (38%) from the previous December and was lower than many economists had predicted.
Tom Davies, Deputy Director of the ONS public service division, said the decline was a result of “revenue rising strongly on last year but spending rising only modestly”.
Despite the annual decline, the December 2025 figure was the tenth highest for the month since records began in 1993, without adjusting for inflation.
And it is higher than in December 2023, when borrowing was £8.1bn.
Figures show the government collected £7.7bn more in taxes in December 2025, up 8.9% compared to the same month in 2024.
The ONS said this consisted of increases in income tax, corporation tax, VAT and National Insurance contributions (NIC), with changes to the rate of NICs paid by employers coming into force in April last year.
The ONS said provisional estimates put borrowing in the financial year to December at £140.4bn, which is around £300m lower than in the same period in 2024.
Treasury Undersecretary James Murray said the government had “stabilized the economy, reduced borrowing, and stamped out waste in the public sector”.
He said: “We doubled our margin last year and are expected to reduce borrowing more than other G7 countries; borrowing this year will be at the lowest level since before the pandemic.”
Ruth Gregory, deputy UK economist at Capital Economics, said public finances were “finally showing signs of improvement in recent months”.
“Furthermore, further improvement is on the way in January. These figures are likely to show a buffer set of self-assessment tax and capital gains tax (CGT) receipts reflecting a freeze on income tax thresholds and the disposal of assets due to speculation that Reeves will increase CGT.”
However, he said, “in the big picture, the pace of deficit reduction remains very slow.”
