Sharp Fall in Government Borrowing in December, Figures Show
Recent figures reveal a significant decline in government borrowing for December, signifying a potentially positive shift in the UK’s fiscal landscape.
– UK government borrowing fell dramatically last month, primarily due to increased revenue from taxes and higher National Insurance Contributions (NIC), which outpaced government spending.
– According to the Office for National Statistics (ONS), December’s government borrowing stood at £11.6 billion, representing a decrease of £7.1 billion (38%) compared to the same month last year.
– While this figure is lower than many economists had anticipated, it still exceeds the borrowing amount recorded in December 2023.
Key Insights on Government Borrowing
– Tom Davies, Deputy Director of the ONS public service division, noted that the decline was driven by “receipts being up strongly on last year whereas spending is only modestly higher.”
– Despite the year-on-year reduction, the December 2025 borrowing figure ranks as the tenth highest for the month since records began in 1993, not adjusting for inflation.
– The government’s budget showed a total tax revenue increase of £7.7 billion—an 8.9% rise—compared to December 2024, driven by growth in income tax, corporation tax, VAT, and NIC, reflecting changes implemented in April of last year.
Spending Trends and Projections
– Public spending in December also rose, partly due to inflation-linked benefits, reaching a provisional estimate of £92.9 billion—£3.2 billion (3.5%) more than December 2024.
– Importantly, this increase in spending was more than offset by heightened tax collections.
– For the financial year up to December, borrowing totaled £140.4 billion, approximately £300 million lower than the same timeframe in 2024.
– This borrowing rate is estimated at 4.6% of GDP, which is down 0.2 percentage points from last year, marking it as the third-highest borrowing level recorded from April to December, following 2020 and 2024.
Government Reactions and Future Outlook
– Chief Secretary to the Treasury, James Murray, asserted that the government is “stabilising the economy, reducing borrowing, and rooting out waste in the public sector.”. He added that the government is on track to cut borrowing more than any other G7 nation and anticipates the lowest levels of borrowing since before the pandemic this year.
– Conversely, Shadow Chancellor Mel Stride argued that Labour has overseen record borrowing for two consecutive years outside the pandemic, emphasizing that debt interest expenditures now nearly double those for defense. He claimed that only the Conservatives present a credible strategy to stabilize public finances.
Expert Analysis
– Ruth Gregory, Deputy Chief UK Economist at Capital Economics, remarked that UK public finances are “finally showing signs of improvement” and anticipates further positive trends in January.
– She noted that upcoming figures would likely reveal robust self-assessment tax and capital gains tax receipts due to the freeze on income tax thresholds and an anticipated disposal of assets reflecting speculation on future capital gains tax reforms.
– However, she cautioned that the overall pace of deficit reduction remains slow.
As December’s figures reflect a sharp fall in government borrowing, there are cautious signs of improvement in the UK’s fiscal health, even as challenges persist in achieving more significant reductions in the budget deficit.