UK's Brown will look for budget boost next week

By Sumeet Desai

LONDON (Reuters) - Prime Minister Gordon Brown is sure to use his government's budget update next week to regain the initiative over opposition Conservatives after a dwindling opinion poll lead forced him to rule out an election this year.

A cut in tax on home purchases and inherited wealth could be on the cards when finance minister Alistair Darling presents his first pre-budget report to parliament this week if the ruling Labour Party wants to steal the opposition's new-found thunder.

On Saturday Brown ruled out an election this year, ending weeks of speculation that he would try capitalize on a huge lead in the polls by calling a contest nearly three years earlier than he must.

Experts say he had little choice given the latest opinion polls show that his Labour Party's lead had all but evaporated in the last week following a successful Conservative Party conference in Blackpool, northern England.

Labour strategists blame the narrowing in their party's lead on Conservative plans to raise the threshold at which inheritance tax is paid to one million pounds and exempt first-time buyers of homes costing less than 250,000 pounds from duty and paying for it by an annual levy on rich foreigners.

Both Brown and Darling have said they will not make any unfunded spending commitments, but they will be acutely aware of the need to win back support after what most people reckon has been a difficult week for the government.

"We expect some fairly large tax cuts purely intended to grab the headlines and shoot the Conservatives' fox," said Roger Bootle of Capital Economics.

Brown already announced on Friday the final go-ahead for a 16-billion pound rail project to connect opposite ends of London and ease the capital's congestion problem.