In the latest official data released on 22 January, Britain’s public sector net borrowing in December 2025 came in at £11.6 billion, marking a significant drop from £18.7 billion a year earlier and below most economists’ forecasts of around £13 billion. The outturn, published by the Office for National Statistics (ONS), exceeded expectations that the government would need to borrow more, providing a modest boost for Chancellor Rachel Reeves as she seeks to stabilise the UK’s public finances.
Despite this fall, the December figure remains one of the ten highest December totals since monthly records began in 1993, reflecting persistent pressures on public finances amid spending commitments and rising debt interest costs. The ONS highlighted that while borrowing shrank by £7.1 billion compared with December 2024 — a 38 per cent reduction — the backdrop of elevated debt levels underscores enduring fiscal tension.
The drop in borrowing was largely driven by stronger-than-expected tax receipts that helped offset public spending. Central government current receipts reached £94 billion in December, bolstered by higher income tax, corporation tax and VAT collections, along with increased compulsory social contributions following changes to employer National Insurance contributions introduced in April 2025. These combined revenues rose by nearly £7.7 billion year-on-year, marking the highest December total on record.
Public sector expenditure also increased compared with a year earlier — driven by higher outlays on public services, social benefits and debt interest — but the rise in spending was smaller than the gains in receipts. The ONS data show borrowing for the financial year to December 2025 amounted to £140.4 billion, slightly down on the same period a year ago but still the third-highest nine-month total on record after 2020 and 2024.
The broader fiscal picture remains challenging. Public sector net debt excluding banks is estimated to be around 95.5 per cent of gross domestic product (GDP), a level not seen since the early 1960s, and debt servicing costs are substantial, with a significant portion of government expenditure devoted to interest payments. Analysts note that while the recent improvement in borrowing provides some breathing space, sustained progress will depend on revenue performance and controlling long-term spending.
Chancellor Reeves has pursued a series of tax rises and fiscal measures over the past year to expand fiscal headroom and meet the government’s self-imposed rule that day-to-day spending be funded through taxation. The better-than-expected December figures have been welcomed by Treasury officials as evidence that these policies may be helping to temper the UK’s budget deficit. However, with borrowing still high in historical terms and economic uncertainties ahead, officials and market watchers caution that further efforts will be needed to bring the public finances onto a more sustainable trajectory.
The December borrowing figures arrive against the backdrop of other recent economic developments, including signs of resilience in the wider UK economy, such as a modest rise in retail sales in December after months of contraction. These mixed signals reflect the complexity of the economic environment as policymakers balance fiscal discipline with support for growth.
