UK government borrowing experienced a significant decrease last month, according to official figures. This decline is attributed to increased tax revenues and higher National Insurance Contributions, which collectively outweighed public spending.
The Office for National Statistics (ONS) reported that government borrowing, representing the difference between public expenditure and tax income, amounted to £11.6bn in December.
This figure reflects a £7.1bn reduction (38%) compared to the previous December and falls below economists’ forecasts. However, it remains elevated compared to the borrowing recorded in December 2023.
Tom Davies, Deputy Director for the ONS public service division, noted that the decrease stemmed from “receipts being up strongly on last year whereas spending is only modestly higher”.
Despite the year-on-year decrease, the December 2025 borrowing figure ranks as the tenth highest for the month since records began in 1993, without adjusting for inflation.
It also exceeds the £8.1bn in borrowing recorded in December 2023.
The data indicates a £7.7bn (8.9%) increase in government tax receipts in December 2025 compared to the same month in 2024.
The ONS cited increases in income tax, corporation tax, VAT, and National Insurance contributions (NIC) as contributing factors, noting the implementation of changes to employer NIC rates in April of the previous year.
The ongoing freeze of income tax thresholds is also resulting in more individuals being subject to taxation or higher tax rates as their earnings increase, a phenomenon known as fiscal drag.
Public spending also saw an increase in December, partially due to inflation-linked increases in benefits.
Provisional estimates place public spending at £92.9bn, £3.2bn (3.5%) higher than in December 2024.
However, this increase was offset by the growth in tax and NIC revenues.
Provisional estimates indicate that borrowing for the financial year to December totaled £140.4bn, approximately £300m lower than the same period in 2024, according to the ONS.
This borrowing figure is estimated to be 4.6% of GDP, a 0.2 percentage point decrease compared to the corresponding period last year.
It represents the third-highest level of borrowing for the April-December period on record, surpassed only by those in 2020 and 2024.
James Murray, Chief Secretary to the Treasury, stated that the government is focused on “stabilising the economy, reducing borrowing, rooting out waste in the public sector”.
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.”
Shadow chancellor Mel Stride contended that it marked the second consecutive year that Labour had “presided over record borrowing, outside the pandemic”.
He stated that debt interest was “at almost double what we spend on defence”, adding: “Only the Conservatives have a credible plan to restore stability to the public finances.”
The Office for Budget Responsibility (OBR) reported that public borrowing between April and December was £4.1bn (2.8%) below its current forecast.
Its forecast for the final three months of the financial year anticipates a 50% rise in capital gains tax (CGT) receipts in January compared to the same month in 2025, due to individuals disposing of assets to take advantage of lower rates before anticipated CGT tax increases in the November Budget.
Ruth Gregory, deputy chief UK economist at Capital Economics, noted that public finances were “finally showing signs of improvement in recent months”.
“What’s more, a further improvement in January is on the way,” she said, adding a “bumper set” of self-assessment tax and CGT receipts was likely.
However, she cautioned that the “big picture is that the pace of deficit reduction remains very slow”.
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