Thursday 22 January 2026 7:12 am
Total UK Government Borrowing Climbs to £140bn Amid Fiscal Challenges
By: Mauricio Alencar, Politics and Economics Reporter
Chancellor Rachel Reeves faces a significant test of credibility as new official data reveals UK government borrowing has reached £140 billion, highlighting the ongoing pressures on public finances despite her commitment to fiscal stability.
December Borrowing Figures and Annual Totals
The Office for National Statistics (ONS) has released figures showing public sector borrowing reached £11.6 billion during December 2025. This represents a notable decrease from the same month in 2024, primarily driven by stronger government receipts while spending saw only modest increases.
Tom Davies, deputy director for the public sector division at the ONS, explained: "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."
The December figure came in below City analysts' forecasts of £13.4 billion, bringing the total borrowing across the current financial year to £140.4 billion. This substantial figure underscores the continuing challenges facing the UK's public finances.
Broader Fiscal Picture and Debt Concerns
The statistics reveal a complex fiscal landscape beyond the headline borrowing figures. The current budget deficit stood at £5.8 billion for December, while public sector debt as a proportion of GDP was estimated at 95.5 per cent.
Perhaps most significantly, the government paid approximately £9.1 billion in debt interest payments to lenders during the month, highlighting the substantial cost of maintaining current debt levels.
Reeves' Fiscal Credibility Challenge
These borrowing figures arrive at a crucial moment for Chancellor Reeves, who has consistently emphasised her commitment to maintaining strict fiscal rules as a cornerstone of her economic credibility. This week, she promoted the UK as a "stable" destination for investors, with her adherence to fiscal discipline forming a central part of her messaging.
However, the borrowing data precedes several significant government spending commitments scheduled to take effect. These include planned increases to welfare benefits for families with more than three children and pensioners through the triple lock mechanism, alongside business rates hikes for hospitality, retail, and other major sectors.
The government has indicated it will offer pubs temporary relief from substantial tax increases, with Reeves acknowledging on Wednesday that "the situation the pubs face is different from other parts of the hospitality sector." Most proposed changes to taxation and spending will only come into effect from April at the start of the new tax year.
Criticism of Fiscal Rules and Structural Deficits
Richard Hughes, the former chair of the Office for Budget Responsibility (OBR), has raised serious concerns about the government's fiscal approach. Speaking to the Lords' Economic Affairs Committee two weeks ago, he criticised the reliance of Reeves' rules on changing forecasts between fiscal events.
Hughes suggested the UK has struggled to build adequate "fiscal resilience" against economic shocks, including turbulence in bond markets, due to the government running a budget deficit of around 5 per cent of GDP.
"Fiscal rules that we now have in place are amongst the loosest that the UK has had in its history," Hughes told the committee. "The rules we have at the moment are providing the government the capacity to run a quite significant structural deficit."
This criticism highlights the tension between the government's borrowing requirements and its stated commitment to fiscal responsibility, creating a challenging environment for Reeves as she seeks to maintain credibility while addressing pressing economic needs.
