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According to recent figures from the Office for National Statistics (ONS), UK government borrowing experienced a significant decrease in December. The total borrowing — which represents the difference between public spending and tax revenues — stood at £11.6 billion for the month. This figure marks a substantial reduction of £7.1 billion, or 38%, compared to December of the previous year. While economists had anticipated a higher amount, borrowing remains greater than in December 2023.
Tom Davies, Deputy Director of the ONS public service division, explained that the decline was largely due to a strong increase in government receipts from taxes and National Insurance Contributions, which outpaced the more modest rise in public spending. Despite the drop, the December 2025 borrowing still ranks as the tenth highest for that month since 1993, without adjusting for inflation. Notably, borrowing exceeded the £8.1 billion borrowed in December 2023.
Tax revenue climbed by £7.7 billion—an 8.9% increase compared with December 2024. This boost included gains from income tax, corporation tax, VAT, and National Insurance Contributions (NIC), the latter seeing adjustments due to revised employer NIC rates introduced in April last year. The freeze on income tax thresholds has further contributed to higher tax receipts, as more taxpayers move into higher bands through inflation-driven wage increases, a situation known as fiscal drag. Public expenditure also rose, estimated at £92.9 billion for the month, around 3.5% higher than the previous December, partly driven by inflation-linked benefit increases. However, the taxes and NICs collected more than compensated for this spending rise.
For the financial year up to December, the government’s borrowing totaled an estimated £140.4 billion, approximately £300 million less than the same period in 2024. This amount equates to 4.6% of GDP, down 0.2 percentage points from the prior year. Although this is still the third-highest borrowing figure recorded for April to December—following 2020 and 2024—it shows progress. James Murray, the Chief Secretary to the Treasury, highlighted government efforts to stabilise the economy and cut borrowing, stating, “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.” Meanwhile, Shadow Chancellor Mel Stride criticized the figures, noting it was the second consecutive year of record borrowing outside of the pandemic period and expressing concern about rising debt interest costs.
The Office for Budget Responsibility (OBR) reported that public borrowing from April to December was £4.1 billion (2.8%) below their forecast. The OBR expects a significant surge in capital gains tax receipts in January, predicting a 50% increase compared to January 2025 due to taxpayers selling assets in advance of anticipated tax increases in the upcoming Budget. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, observed signs of fiscal improvement in recent months and anticipates further gains early this year supported by a strong inflow of self-assessment and capital gains tax payments. Nonetheless, she cautioned that the overall pace at which the deficit is shrinking remains slow
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