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By William James and William Schomberg
BIRMINGHAM, England, Sept 29 (Reuters) - British financeminister George Osborne will promise on Monday to scrap a tax oninherited pension savings as he lays out the ConservativeParty's economic pitch for next year's election.
Speaking to media before his speech, Osborne also sought totackle the electoral threat posed by the UK Independence Party(UKIP) whose stance on immigration and Europe could draw votesfrom the Conservatives and benefit Labour at the election. TwoConservative MPs have defected to UKIP in recent weeks.
Asked about polls on Sunday showing UKIP have siphonedsignificant support from the Conservatives, Osborne said: "Whatpeople are going to realise as they approach the election isthat a vote for UKIP is a vote for Labour... I don't thinkthat's what people want in this country."
Ahead of what is expected to be a close-run ballot in May,Osborne will use a key speech on Monday to try to persuadevoters that only Prime Minister David Cameron's Conservativescan be trusted to keep Britain's economic recovery on track.
The Conservatives, who have ruled in coalition with the moreleft-wing Liberal Democrats since 2010, are rated by voters muchmore highly than the opposition Labour party on the economy. Butthey lag narrowly behind Labour in opinion polls less than eightmonths before the election.
In a move aimed at the party's ageing supporter base, Osborne will commit to abolishing before the election a 55percent tax levied on pension pots of savers when they die.
"People who have worked and saved all their lives will beable to pass on their hard-earned pensions to their familiestax-free," he will tell the Conservatives' last conferencebefore the election, according to advance extracts of hisspeech.
Osborne has focused on bringing down Britain's massivebudget deficit since he took over the finance ministry in 2010.But with the public accounts still deep in the red, he haslittle room to offer major tax cuts ahead of the election.
The new pledge to be announced on Monday is expected to costaround 150 million pounds (244 million US dollar) a year,according to a Conservative briefing note.
Nonetheless, his offer to scrap the pension pot tax strikesa contrast with the latest ideas from Labour.
Last week, Labour promised to levy new taxes on homes worthmore than 2 million pounds ($3.3 million) and on tobacco firmsin order to pump cash into healthcare if it wins the election.
Britain's economy has staged a much stronger-than-expectedrecovery since mid-2013 and Osborne, in his speech on Monday, will seek to remind voters that keeping the economy growing willbe vital to create jobs, build more houses, fund healthcare andraise living standards.
"That's why it's the economy that settles elections," he isexpected to say, "The Conservatives are the only people inBritish politics with a plan to fix the economy."
Osborne has long sought to remind voters that Labour was inpower during the 2007-08 financial crisis that plunged Britaininto its deepest post-war recession.
Osborne says the increasingly left-wing ideas of Labourleader Ed Miliband threaten the push to eliminate the budgetdeficit before the end of the decade.
"The idea that you can raise living standards, or fund thebrilliant NHS (National Health Service) we want, or provide forour national security without a plan to fix the economy isnonsense," Osborne will say.
Last week, Miliband gave a conference speech in which heforgot to mention the budget deficit. Labour's would-be financeminister Ed Balls has said the party will tackle the deficitwith a plan that is less aggressive than Osborne's.
Labour dismissed Osborne's planned speech as failing totackle the issues they say matter to ordinary Britons.
"George Osborne claims he has fixed the economy, but he'sonly fixed it for a privileged few at the top," said ChrisLeslie, Labour's finance spokesman.
TAX ABOLISHED
Osborne's pledge to scrap the tax on pension savings hasechoes of how, when in opposition in 2007, he promised to cutinheritance tax. That popular move was widely credited withdissuading the Labour prime minister at the time, Gordon Brown,from calling a snap election he had looked likely to win.
Osborne turned his attention to elderly voters again earlierthis year, scrapping a requirement that most pensioners buyannuities on retirement and allowing them to spend their pensionsavings as they wanted.
The Conservative Party saw a small boost in opinion pollsafter those reforms were announced.
That shake-up hit shares in firms such as Legal & General, Aviva and Standard Life which sellannuities, and experts predicted the latest tax measure couldalso affect demand for such products.
(1 US dollar = 0.6158 British pound) (Additional reporting by Simon Jessop; Editing by CatherineEvans)
