Taxes will have to rise if the government is to balance the books by the middle of the next decade and the NHS may have to be privatised, the International Monetary Fund has warned.

Property taxes, the removal of preferential VAT rates for goods such as pasties, and higher national insurance contributions by the self-employed need to be considered if Britain is to have any chance of eliminating its budget deficit by 2025 because spending cuts have gone about as far as they can, the global economic watchdog said in its annual review of the UK.

Weak productivity and the increasing care demands of an ageing population will make deficit reduction harder. Public services such as the NHS may have to be scaled back or