The UK government borrowed less than expected in December, official figures show, after stronger receipts than a year earlier.

Public sector net borrowing – the difference between spending and income – was £11.6bn last month, the Office for National Statistics said, compared with £18.7bn in the same month a year earlier.

Economists polled by Reuters had expected borrowing to be £13bn in December. The figure is closely watched by the City as it shows how much the government is borrowing to finance its spending plans and whether it is exceeding its target for the year.

Borrowing in the financial year so far to December was £140.4bn, down £300m compared with the same period last year. Borrowing in the previous months of the year was also revised down by a combined £3.5bn.

Tom Davies, a senior statistician at the ONS, said: “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 chancellor, Rachel Reeves, has made reducing government borrowing a priority, especially because the charge on its debt is currently so high, with £1 in every £10 spent going on debt interest.

The ONS figures show that interest costs accounted for £9.1bn of the £11.6bn of net government borrowing in December.

Dennis Tatarkov, a senior economist at KPMG UK, said this iwas likely to ease in the coming months.** “**With interest rate cuts expected later this year and the eventual ending of the Bank of England’s quantitative tightening programme on the horizon, the Treasury could see a marked decline in borrowing costs, potentially creating more room for public spending,” he said.

Reeves announced £26bn in tax rises in her autumn budget in November to offset rising government spending on public services and upgrades to the nation’s infrastructure. The chancellor has implemented a fiscal rule that requires the government to fund day-to-day spending with taxes by the end of the parliament.

The Office for Budget Responsibility, the UK’s official forecaster, said in its November report that Reeves’s tax rises had created £22bn in spending headroom against this fiscal rule.

The OBR has projected that public sector net borrowing for the financial year will fall to £138bn, down from £152.6bn a year earlier, and take the deficit to 4.5% of gross domestic product, down from 5.2% in 2024-25. Borrowing will then decrease every year to reach £67bn by 2031.

James Murray, the chief secretary to the Treasury, said: “Last year we doubled our headroom and we are forecast to cut borrowing more than any other G7 country with borrowing set to be the lowest this year since before the pandemic. It cannot be right that £1 in every £10 we spend goes on debt interest – which could be better spent on our nurses, police officers and teachers - that’s why we’re tackling it.

“We are stabilising the economy, reducing borrowing, rooting out waste in the public sector and making sure that public services deliver value for taxpayers’ money.”