At the end of December 2025, the UK government’s borrowing afterwards plummeted to £7.1 billion. This was a huge 38% drop from the £11.6 billion the year before. The ONS has published some groundbreaking new data. First, it reflects one of the biggest turning points in public finances, particularly at the federal level, where booming tax revenues outstripped spending growth.
Yet the borrowing picture for December is perhaps more impressive. That means it’s the tenth highest total for this month since we began tracking in 1993—in real, inflation-adjusted dollars! In the financial year ending in December, the government borrowed £140.4 billion in total. This value is about £300 million lower than what’s been logged for the same quarter in 2024.
Tom Davies, Deputy Director for the ONS public service division explained what’s behind this drop. He stated, “receipts being up strongly on last year whereas spending is only modestly higher.” In fact, the federal government’s tax receipts more than doubled in December 2025. They took in £7.7 billion more than the same month in December 2024, an extraordinary 8.9% increase.
Economists had anticipated a big increase in borrowing for December. At first glance, this seems like a much more fiscally responsible tone from Washington. Ruth Gregory, deputy chief UK economist at Capital Economics, noted that public finances are “finally showing signs of improvement in recent months.” She had reasons to be hopeful for January as well, saying, “What’s more, even better news for January is on the way. The returns are sure to show a huge jump in self-assessment tax and CGT returns. Part of this increase is due to the income tax thresholds being frozen, as well as asset disposal, both driven by speculation that Reeves would raise CGT.
James Murray, a representative from the UK government, emphasized the administration’s commitment to fiscal responsibility by stating their aim of “stabilising the economy, reducing borrowing, rooting out waste in the public sector.” He was completely right when he said that, “Last year, we doubled our headwind. On that note, he promised that our borrowing would go down more than any other G7 country as we return to our pre-pandemic levels of debt.
Here’s how the UK government has successfully steered through its fiscal storm. This record achievement was only made possible through increased tax revenues and prudent, managed spending. Borrowing, meanwhile, is dropping sharply. These figures have government officials and some economists hopeful for continued improvement in the months ahead.