U.K.'s Hunt details £55 billion package to restore battered fiscal credibility

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By Geoffrey Smith 

Investing.com -- The U.K. government announced a £55 billion (£1 = $1.1845) package of tax increases and spending cuts on Thursday, in an effort to fill a yawning gap in public finances created by the country's slide into recession. 

Chancellor of the Exchequer Jeremy Hunt said the measures will be split roughly evenly between tax increases and spending cuts. 

The consolidation package "means that inflation and interest rates end significantly lower" over a five-year timeframe than would otherwise have been the case, Hunt said, citing new forecasts from the Office for Budget Responsibility.

Those forecasts suggest U.K. GDP will contract by 1.4% next year, under the influence of the after-effects of the pandemic and what Hunt called "a made-in-Russia energy crisis", before returning to growth in 2024. 

The pound fell initially on the news before recovering to $1.1845 by 06:53 ET (11:53 GMT). 

As indicated by leaked reports earlier in the week, the package includes a new 45% windfall tax on the excess profits of electricity generators. Shares in SSE (LON:SSE) and Drax (LON:DRX) fell over 3% in response, while Centrica (LON:CNA) stock fell 1.1%.

The government will also increase the levy on windfall profits in the oil and gas sector, to 35% from 25%, and extend it through April 2028. Shares in BP (LON:BP) and Shell (LON:RDSa) shrugged off the news, having already discounted the move.