UK government borrowing fell to £11.6bn in December 2025, according to official figures. This was £7.1bn lower than the same month a year earlier and also below economists’ expectations of around £13bn.

As a result, December delivered a rare improvement in public finances. Stronger-than-expected revenues helped reduce the amount the government needed to borrow during the month.

💰 Tax Receipts Drive the Improvement

The fall in borrowing was driven by a sharp rise in tax receipts. Income tax and national insurance contributions performed strongly during December. Together, these helped push total government receipts to around £94bn, a record level for the month.

Meanwhile, public spending also increased. Government expenditure rose by around £3.2bn to £92.9bn. However, revenue growth exceeded spending growth. Consequently, borrowing fell despite higher costs.

📊 Borrowing Remains High Over the Financial Year

Despite the December improvement, borrowing over the wider financial year remained elevated. Public sector net borrowing for the year to December totalled £140.4bn.

Although this figure was slightly lower than the previous year, it still ranked among the highest levels seen since the early 1990s. In addition, revisions to earlier data reduced the cumulative total by £3.5bn, largely due to stronger corporation tax receipts.

Nevertheless, the overall borrowing position stayed historically high.

📈 Debt Levels Continue to Pressure Public Finances

UK national debt stood at around 95.5% of GDP at the end of December. This level is close to figures last seen in the early 1960s.

At the same time, debt interest costs remained significant. Roughly £1 in every £10 spent by the government went toward servicing debt. Therefore, even with lower borrowing, pressure on public finances continued.

🏛️ Government Policy and Fiscal Strategy

Chancellor Rachel Reeves has made reducing borrowing a central policy goal. Last autumn, she introduced around £26bn in tax rises, which officials say helped lift revenues during the year.

However, public spending demands remain high. As a result, balancing lower borrowing with ongoing expenditure continues to challenge fiscal policy.

🔮 Forecasts for the Years Ahead

According to the Office for Budget Responsibility, borrowing is expected to fall further over time. Forecasters estimate total borrowing of about £138bn for the full financial year.

They also project a gradual decline to roughly £67bn by 2031. However, these forecasts depend on economic conditions and future policy decisions. Therefore, risks to the outlook remain.