The IMF has warned the chancellor that he must act to ensure that tax rises in line with government spending.

In a health check on the UK economy, the IMF suggests extending VAT to food and the introduction of charges for public services as ways to ensure that borrowing does not rise.

But writing in the Times, Gordon Brown shrugs off the warning and promises tax cuts for business in his coming budget.

"We must do more to foster a spirit of enterprise," said the chancellor in an article which is likely to add further strains to relations with trade unions.