The UK government's borrowing in December fell to the lowest level since 2003, with the deficit significantly improving, supporting Rishi Sunak's fiscal control.

The British government's borrowing in December fell more than market expectations, as strong tax revenues provided strong support for Chancellor of the Exchequer Rishi Sunak's efforts to control public finances. Data released by the UK's National Statistics Office on Thursday showed that government spending exceeded tax revenue by 11.6 billion (approximately $15.6 billion) that month. Compared to the same period last year, the deficit decreased by 7.1 billion, which was lower than the median expected value of 13 billion from an economist survey. It is worth mentioning that this is the first time since 2003 that the UK government's borrowing in December has fallen to such low levels. The strong performance of tax revenue in the UK is partly attributed to the tax hikes that came into effect in April last year and the current steady wage growth situation. The strong tax revenue has to some extent eased the widespread spending pressures, including the costs incurred in providing support for children with special education needs. With tax revenue increasing due to the tax hikes introduced in the October 2024 budget, there are signs of improvement in public finances, which is good news for Chancellor Rishi Sunak. In November last year, she took further action to calm the volatile bond market by raising taxes by 26 billion. However, this measure caused her to deviate from the fiscal rules by more than double. These fiscal rules require that by the end of this decade, tax revenue must balance daily expenditure. Tom Davis, a senior statistician at the UK's National Statistics Office, said, "Borrowing in December 2025 was significantly lower than in December 2024, mainly due to a substantial increase in income this year, with spending only showing a slight increase." Tax revenue in the past few months has outperformed previous expectations, with corporate tax revenue increasing by 1.9 billion. In December last year, tax revenue increased by 7.7 billion compared to the same period the previous year. This significant increase was mainly due to an additional 3 billion in national insurance contributions and an increase of 2.5 billion in income tax revenue. In addition, national insurance contribution income increased by nearly 19% in the first nine months of the 2025-2026 fiscal year compared to the same period the previous year. Central government day-to-day spending increased by 3.2 billion compared to the same period the previous year, while net investment in capital projects showed a decline. The Office for Budget Responsibility, led by Sunak, predicted that borrowing in the current fiscal year ending in March would reach 138.8 billion. This forecast implies that the deficit as a proportion of GDP will decrease from 5.2% in 2024-2025 to 4.5%. In the first nine months of this fiscal year, the deficit was 140.4 billion, slightly lower than the same period last year. This improvement in the fiscal situation is due to a significant downward revision of 3.5 billion in previous borrowing data. In the UK, the official fiscal year of the government typically runs from April 1st to March 31st the following year. James Murray, Chief Secretary to the Treasury, said, "We are stabilizing the economy, reducing borrowing, tackling waste in the public sector, and ensuring that taxpayers' money is effectively spent on public services." However, Ruth Gregory, Deputy Chief Economist for the UK at Capital Economics, warned, "The process of reducing the deficit is still very slow, and the political vulnerabilities of Starmer and Reeves raise doubts about whether the fiscal austerity measures planned for the next few years can be successfully implemented."