UK government borrowing fell sharply in December 2025. The overall unaudited figures for August across England came in at £7.1 billion—a fall of 38% compared to the like month last year. The Office for National Statistics (ONS) today declared total December borrowing at £11.6 billion. That figure is significantly lower than what most economists had expected. It is still higher than the £8.1 billion in December 2023.
The ONS, in its latest report, has delivered an early Christmas present with news of a record drop in borrowing. This drop is due to an overall £7.7 billion increase in tax receipts, growing by 8.9% from December 2024. Spending has gone up, albeit at a slower rate. This prudent raising of the ceiling has been effective in restoring public finances…
Ruth Gregory, deputy chief UK economist at Capital Economics, remarked on this development, stating that public finances are “finally showing signs of improvement in recent months.” This is a welcome change and an indication of the increasingly upbeat mood about the direction of travel of the UK’s economic recovery.
Tom Davies, Deputy Director for the ONS public service division spoke in greater detail about what has driven this reduction in borrowing. And more importantly, he noted that receipts are up tremendously over last year. At the same time, spending has only slightly ticked up. Indeed, the key to getting to this outcome.
Compared to last December, we’re looking at significant progress. Overall borrowing for the entire financial year to date is now £140.4 billion – around £300 million less than this time in 2024. The December net borrowing figure of £27.5 billion means that December borrowing was the tenth highest amount borrowed for the month since records began in 1993. This number is not adjusted for inflation.
In a press release, government spokesperson James Murray reinforced the administration’s work in stabilizing the economy. He drove home the point that their approach is focused on big moves. These are all worthy goals, such as stabilizing the economy, reducing borrowing, and rooting out waste in the public sector.
Looking forward, Gregory was hopeful that even more progress would be seen in January. However, she indicated that very soon-to-be-released figures should reflect a large increase in self-assessment tax and capital gains tax receipts. This increase is smartly attributed to raising income tax thresholds and to market speculation driven by potential tax reform.
“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 receipts reflecting the freeze on income tax thresholds and a disposal of assets due to the speculation that Reeves would raise CGT.” – Ruth Gregory