By Sumeet Desai

LONDON (Reuters) - Prime Minister Gordon Brown's government will launch new tax and spending plans on Tuesday in a bid to regain the initiative after its poll lead over the Conservatives shrank last week.

A cut in tax on home-buying and inherited wealth could be on the cards if the Labour Party wants to steal the opposition's new-found thunder when Chancellor Alistair Darling presents his first pre-budget report to parliament at 3:30 p.m.

The NHS, meanwhile, looks sure to get billions in extra funding over the next three years and Darling is expected to find some cash for a few crowd-pleasing initiatives to help families and pensioners.

But the overall spending envelope remains tight. Total expenditure will rise by just 2 percent a year -- the tightest settlement in a decade.

Darling will probably also have to borrow more next year as economic growth will likely fall short of the 2.5 percent to 3 percent rate predicted in March, though for now he can blame the trouble in financial markets.

POLITICAL FALLOUT

Brown has been riding high in the polls since taking over from Tony Blair in June. But the former chancellor's honeymoon ended last week after his lead narrowed sharply in the wake of the Conservatives' annual conference.

The new PM was on Saturday forced to rule out an election this year, ending weeks of speculation that he would call a contest nearly three years earlier than he must. The opposition immediately branded him a coward.