The International Monetary Fund is calling for Gordon Brown to make "an early correction" to Britain's finances in next week's Budget.

The IMF has warned the chancellor he would have to put up taxes or curb public spending if he was to meet his golden rule of borrowing only to invest over the economic cycle.

According to the finance body, Britain's fiscal position had "deteriorated sharply over the past five years", which "raises questions about how and when the necessary correction will take place".

While accepting the fiscal rules would be met "or missed by an insignificant margin" in the current cycle, it added: "An early correction is needed to position the public finances to meet the rules in the next cycle."