The UK government has revealed that borrowing will be £37 billion less than predicted in December 2025. The UK’s Office for National Statistics (ONS) reported that figure neared £11.6 billion. This includes a huge drop of £7.1 billion. It reflects a 38% reduction from December 2024 when borrowing reached its highest level of £18.7 billion. Furthermore, December 2025’s borrowing is higher than the previous year’s figure of £8.1 billion but represents the tenth highest borrowing amount for this month since records began in 1993.
This week’s data has shown that total UK government borrowing during the financial year to the end of December has amounted to £140.4 billion. This total is nearly £300 million less than it was over the equivalent period in 2024. Even economists of a generally fiscally conservative bent are astonished at this drastic drop in government borrowing. They were hoping for a much larger number in December.
In December, the government enjoyed an unexpected windfall in tax receipts. They were £7.7 billion over December 2024, a remarkable 8.9% rise in tax revenues. Tom Davies, Deputy Director for the ONS public service division, pointed out that borrowing has fallen considerably. He attributed this decline entirely to the spectacular growth in tax revenue, which overshadowed the meager growth in federal spending.
“Receipts being up strongly on last year whereas spending is only modestly higher,” – Tom Davies
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, expressed optimism regarding the current trends in public finances, noting that they are “finally showing signs of improvement in recent months.” She further forecast an upward trend starting in January. That’s thanks to self-assessment tax and capital gains tax receipts expected to increase, largely because of planned income tax threshold freezes and speculation about capital gains tax increases.
“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
James Murray, a spokesperson for the Treasury, emphasized the government’s commitment to stabilizing the economy and reducing borrowing while eliminating waste within the public sector. He made sure to point out that last year’s efforts carved out twice the headroom. Moreover, he noted that the UK is on track to make the deepest cuts to borrowing of any G7 country this year.
“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
The latest ONS figures paint a picture where the UK government’s fiscal strategy is finally bearing fruit. Stronger tax revenues are dramatically lowering levels of required borrowing. Given national inflation, high interest rates and other challenges, the robust performance in tax collection is a bright spot.