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UK's Osborne to stress job not done on budget

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British finance minister George Osborne will on Monday reinforce his plans for lower spending to allow for the possibility of tax cuts as the Conservative-led government tries to seize the initiative in a pre-election year.

Osborne will stress in a speech on Monday that the job of fixing Britain's still wide budget deficit is far from done, according to extracts given to media by the Treasury.

But he will also highlight how the government has lowered income taxes for many earners and frozen fuel duties as part of his long-term plans for the economy, which staged a surprise recovery in 2013 but remains smaller than before the financial crisis.

(Read More: UK house prices soar: Biggest jump in 4 years)

Osborne will say that the way to permanently cut taxes is to permanently cut spending.

Other elements of the government's strategy that Osborne will highlight include better infrastructure, the government's plans to cap welfare, and reducing immigration.

He is not expected to announce new measures in his speech. Instead, he will underscore how the budget deficit has been cut by a third under his watch.

(Read More: UK unemployment falls, putting rate hike in focus)

"That's the good news," Osborne is due to say at a car parts plant. "The bad news is: There's still a long way to go."

The Conservatives lag the opposition Labour party in opinion polls. But they score more highly for economic policy and they regularly blame Labour for running up a deficit equivalent to more than 10 percent of gross domestic product before it lost power in the 2010 election.

Prime Minister David Cameron sought to steal a march on his rivals in next year's election on Sunday, pledging that he would continue to protect pensioners' incomes.

In an interview with the Sunday Times newspaper, Cameron also said he hoped the economy would improve to the point where further tax cuts would be possible.

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