In the UK, for example, the national government announced an unexpectedly large drop in deficit spending for December 2025, a sign of improving public finances. Government borrowing in December came in at £11.6 billion, a £7.1 billion—38%—drop from last December’s £18.7 billion. This drop was due to a surge in tax revenues exceeding federal expenditures.
Economists were expecting a greater negative borrowing score, but the results were proof of a more optimistic budgetary picture. Tax receipts were £7.7 billion higher, an 8.9% increase on December 2024. This surge in income was a key factor in shoring up the central government’s fiscal health.
This week, the Office for National Statistics (ONS) announced that borrowing for the financial year ending in December had hit £140.4 billion. This figure is almost £300 million less than the total announced for the same period in 2024. These numbers are a positive sign that the government is serious about getting its fiscal house in order.
Ruth Gregory, deputy chief UK economist at Capital Economics, celebrated the continued strong performance on public finances.
“Public finances are finally showing signs of improvement in recent months.” – Ruth Gregory
Tom Davies, Deputy Director for the ONS public service division, put this down to two main factors driving the fall in borrowing.
“Receipts being up strongly on last year whereas spending is only modestly higher.” – Tom Davies
The December 2025 borrowing number is the 10th highest for that month since record keeping began in 1993. This ranking does not consider inflation. That backdrop highlights just how important recent developments in federal and state government finances are.
James Murray, assistant secretary of the Treasury, stressed the administration’s focus on fiscal responsibility and economic stability.
“Stabilising the economy, reducing borrowing, rooting out waste in the public sector.” – James Murray
Beyond the encouraging December numbers, even better things are to come in January. Gregory noted that future data could indicate a dramatic increase in self-assessment tax and capital gains tax receipts. This increase comes largely as a result of recent increases in the income tax thresholds and asset sales.
“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
As the UK government continues to navigate its fiscal policies, these developments signal a cautious optimism about potential improvements in public finances moving forward. The data paints a hopeful picture of a wider trend toward fiscal responsibility that would provide dividends for the nation’s economy at-large.