The UK government’s borrowing fell sharply in December, dropping by £7.1 billion or 38% compared to the same month in 2024, according to data from the Office for National Statistics (ONS). The borrowing figure of £11.6 billion was £1.6 billion lower than the Office for Budget Responsibility (OBR) had forecast.
The significant reduction in borrowing was driven by a substantial increase in tax receipts, which rose by £7.7 billion or 8.9% year-on-year. This was largely due to higher income tax, corporation tax and VAT payments. Additionally, the rise in the employer national insurance rate from April also boosted government coffers.
However, total central government spending on public sector services, benefits and debt interest increased by £3.2 billion in December compared to the previous year. This was partly due to inflation-linked rises in many benefits and an increase in state pension payments, as well as higher spending on goods and services driven by pay rises and inflation.
“Borrowing in December was substantially down on the same month in 2024, as a result of receipts being up strongly on last year whereas spending is only modestly higher,” said ONS senior statistician Tom Davies.
Despite the strong performance in December, the picture for the financial year to date is less rosy. Borrowing for the first nine months of the fiscal year totalled £140.4 billion, dipping by just £300 million or 0.2% compared to the same period in 2024.
Chief Secretary to the Treasury James Murray said the government is “stabilising the economy, reducing borrowing, rooting out waste in the public sector and making sure that public services deliver value for taxpayers’ money.” However, AJ Bell’s head of financial analysis Danni Hewson warned that “with further increases to benefit payments on the way in April, the pressure on the public purse is still uncomfortable.”
