IMF report recommends VAT on food
The International Monetary Fund believes Gordon Brown should match spending increases with tax rises and consider extending VAT to food.
According to its annual health check of the UK economy, the IMF has warned the Treasury any spending should be offset by removing the zero-rating of VAT on food and increasing charges for public services.
Most of the increase would fall on richer households, and poorer households could be compensated by larger tax credits.
However, the Treasury rejected the VAT proposal, saying the government was bound by a manifesto promise not to change the zero-rating.