UK must boost economic growth, IMF warns

The UK may need to cut taxes such as VAT to boost growth if the economic recovery fails to take off, the International Monetary Fund (IMF) has warned.

In its annual look at the UK economy, the IMF backed the government's deficit-reduction plans but suggested new spending on infrastructure projects.

It also suggested the Bank of England consider further monetary stimulus, such as more quantitative easing (QE) and a further cut in interest rates.

The IMF warning came on the day it was announced inflation has fallen back to 3%, its lowest rate in more than two years.

Stephanie Flanders reports.