As it stood in December 2025, UK government borrowing had fallen by more than a third. This drop represents an incredible turnaround from last year’s record hunger crisis. The Office for National Statistics (ONS) has come out with the latest statistics. Total borrowing for the financial year to December soared to £140.4 billion, equivalent to 25% of Government tax income. This figure is around £300 million less than it was at the same point in 2024. This burgeoning trend indicates that public finances have made a conspicuous and continued comeback.
The drop in borrowing can be entirely explained by a growth in tax revenue that was higher than the rise in expenditure. In December 2025, the UK government took out £11.6 billion in additional loans. This represents a huge cut of £7.1 billion, or 38%, compared to December 2024. Nonetheless, this is still above the £8.1 billion at the end of December 2023.
Tom Davies, Deputy Director for the ONS public service division, explained that the drop in borrowing stems from “receipts being up strongly on last year whereas spending is only modestly higher.” That’s right, in December 2025 the government raised £7.7 billion other than in December 2024. That’s a huge boost, a massive 8.9% increase, wowza!
Ruth Gregory, deputy chief UK economist at Capital Economics, remarked on the positive trend in public finances, stating they were “finally showing signs of improvement in recent months.” In her January address, she underscored her hope for further advances. She had predicted that the next set of figures would reflect a significant increase in corporation tax and capital gains tax receipts.
“What’s more, a further improvement in January is on the way. Those figures will probably show a bumper set of self-assessment tax and capital gains tax (CGT) receipts reflecting the freeze on income tax thresholds and a disposal of assets due to the speculation that Reeves would raise CGT.” – Ruth Gregory
Back in December, we were encouraged to report by the spate of positive developments. That said, the £11.6 billion figure is still the tenth highest for that month since records began in 1993. The government continues to focus on stabilising the economy and reducing borrowing while addressing waste within the public sector, as highlighted by James Murray from the Treasury.
“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.” – James Murray