Borrowing in the UK government decreased to £11.6 billion in December 2025. This outstanding £7.1 billion drop when compared with December 2024 demonstrates the continued progress of the nation’s financial health. The Office for National Statistics (ONS) has recorded a 38% decline from last year. This drop caught most economists off guard – it’s been the lowest by far relative to people’s expectations.
In fact, the ONS counted December 2025’s borrowing as the 10th largest for that month since records started in 1993. In the fiscal year ending with December, overall public sector borrowing reached £140.4 billion. This depth was £300 million lower than what was loaned out over the comparable period of 2024. This decline in borrowing has led to hopes of a more stable public finance situation.
Perhaps the most important reason for this fall is the rise in tax revenues. In December 2025, the UK government raised £7.7 billion more in tax revenue than they did in December 2024. This increase is due entirely to a concomitant, huge 8.9% increase in tax revenues. The jump in receipts is driven by a few major factors. Better economic times and smart fiscal policy have been key.
Tom Davies, Deputy Director for the ONS public service division, noted, “receipts being up strongly on last year whereas spending is only modestly higher.” These unprecedented government interventions to stabilize the economy are starting to look like they are bearing fruit. Tax revenues are finally outpacing spending increases, and that’s an especially good thing.
Ruth Gregory, the deputy chief UK economist at Capital Economics, commented on the improving situation by stating that public finances are “finally showing signs of improvement in recent months.” She highlighted expectations for continued positive trends, indicating that “a further improvement in January is on the way.” To be sure, we expect a very strong improvement due to robust self-assessment tax receipts and capital gains tax receipts. This increase is indicative of the recent policy efforts and current economic activity.
While these are good and positive things, we need to be clear that even borrowing as recently as December 2025 is still well above pre-pandemic trends. In December 2023, public sector borrowing hit £8.1 billion. This chart underscores the budgetary realities the Administration must contend with as it seeks to achieve a more fiscally sustainable path.
James Murray, a prominent figure in the UK government’s economic strategy, emphasized the administration’s commitment to stabilizing the economy and reducing borrowing. He stated, “Last year we doubled our headroom and we are forecast to cut borrowing more than any other G7 country with borrowing set to be the lowest this year since before the pandemic.” This aspirational statement is a powerful declaration of an ambitious agenda focused on improving financial resilience in the face of shifting economic fortunes.