Borrowing was expected to fall by £2.9 billion in December 2025—that’s over a year-and-a-half away. The final amount had climbed to £11.6 billion. This represented a significant decrease from £8.1 billion the year before, equating to a £7.1 billion (38%) cut. The Office for National Statistics (ONS) was the first to publish these figures, trumpeting an even rosier fiscal picture for the government.
After a few months of increases, borrowing dropped significantly this month. This decline is mostly due to an enormous increase in federal tax revenue, outpacing government spending. In December 2025, the government collected £7.7 billion more in taxes compared to December 2024, representing an 8.9% increase in tax income. This increase in revenue has been a cause for celebration among economic pundits.
Ruth Gregory, deputy chief UK economist at Capital Economics, stated that public finances are “finally showing signs of improvement in recent months.” She remarked that the rising trend of tax income is a positive indicator for the government’s fiscal management plan.
Tom Davies, Deputy Director for the ONS public service division, elaborated on the figures, asserting that “receipts being up strongly on last year whereas spending is only modestly higher” contributed significantly to the reduction in borrowing.
The December 2025 borrowing figure is an encouraging sign. It remains the tenth highest for that month since records began in 1993. In the financial year to December, overall government borrowing reached £140.4 billion. This figure is approximately £300 million lower than that which we witnessed in the same period of 2024.
James Murray, a Treasury spokesperson, stressed the importance of calming the economy and reducing the deficit. He emphasized that our bipartisan efforts to root out waste within the public sector have been successful. He added, “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.”
As the government steers through the murky waters of its overall financial plan, analysts predict even more positive strides in January.
“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 speculation that Reeves would raise CGT.” – Ruth Gregory