By Jonathan Ferreira
UK government borrowing fell sharply in December as tax income and National Insurance Contributions outpaced spending, according to figures from the Office for National Statistics. The public sector borrowed £11.6 billion last month, a decline of £7.1 billion, or 38%, compared with December 2024. While the drop was larger than many economists had forecast, it still exceeded the £8.1 billion borrowed in December 2023. Tom Davies, deputy director for the ONS public service division, said the reduction reflected a strong rise in government receipts alongside only modest growth in spending.
The increase in income stemmed from higher payments in income tax, corporation tax, VAT, and employer National Insurance Contributions, partly influenced by last year’s adjustments to the NIC rate. Public spending also rose by £3.2 billion to £92.9 billion, primarily due to inflation-linked benefit payments, but this was outweighed by the surge in revenues. Provisional estimates suggest that borrowing from April to December 2025 reached £140.4 billion, slightly lower than the same period in 2024, equivalent to 4.6% of GDP. Despite the drop in December, it was still the third-highest level of borrowing over this period on record, trailing only 2020 and 2024.
Officials said the figures indicate a stabilizing economy and the start of a gradual reduction in public debt. Treasury Chief Secretary James Murray highlighted efforts to cut waste and predicted the lowest borrowing since before the pandemic. Economists noted signs of improvement, with expectations of further gains in January due to self-assessment tax and capital gains receipts. However, some critics warned that the pace of deficit reduction remains slow, pointing out that debt interest payments now nearly double defense spending. Overall, the December figures offer cautious optimism while underscoring ongoing challenges in restoring fiscal stability.
