UK Chancellor of the Exchequer George Osborne will today set out his plan for the economy, holding out the possibility of tax cuts funded through more welfare savings. In a speech in central England, he will say that while the economy is improving, sticking to his deficit-reduction program remains vital to keep interest rates low. He told BBC Radio 4 today that a further £25 billion pounds (€30.2 billion) of government-spending cuts will be needed after the 2015 general election.

“We’ve got to make more cuts,” Osborne will say, according to extracts released by the Treasury. “There is still a long way to go, and there are big, underlying problems we have to fix in our economy.”

Prime Minister David Cameron told the BBC yesterday that any future tax cuts would be targeted "at the lowest-paid." Though unemployment has fallen and the recovery taken hold, the Tories are still trailing the opposition Labour Party in the polls, with the latter arguing the rising cost of living is eroding the benefits of the faster growth.

Osborne will say that any permanent tax cuts would have to be funded from reductions in spending.

Osborne set out plans to return the budget to surplus in 2019 for the first time since 2001. He has cut welfare by more than £20 billion since taking office in 2010 and is proposing to introduce a cap on £100 billion of social-security spending, excluding state pensions. The UK’s fiscal watchdog last month raised its forecast for economic growth in 2014 to 2.4 per cent from 1.8 per cent and said government borrowing would be less than previously predicted.

Osborne will also say immigration needs to be reduced, as uncontrolled immigration brings pressure on public services and leads to abuses of the welfare system.

Bloomberg