Abolishing zero and reduced rates of VAT would cut compliance and administration costs for business and government, according to an influential think tank. The move would also mean less interference with people's spending decisions, and raise enough revenue both to improve the living standards of poorer families and to cut taxes by £11bn. This is the view of a study of the tax system chaired by Nobel prize-winner Sir James Mirrlees for the Institute of Fiscal Studies. The current 17.5% standard rate of VAT is around average for industrial countries, but the UK applies zero rates more extensively than most other countries, according to the study. Children's clothing and most foodstuffs are among the items zero-rated, while a reduced 5% rate applies to domestic energy and other items. It says applying reduced rates of VAT to items on which poorer households spend a relatively large proportion of their budgets is 'a blunt instrument', as richer households typically gain more in cash terms from these tax breaks than poorer ones.. Scrapping the existing zero and reduced rates would raise around £23bn. If £12bn of the extra cash were spent on increasing benefit and tax credit rates by 15%, this would leave the poorest three-tenths better off on average, while raising £11bn to cut other taxes. Robert Chote, director of the IFS, said: 'The main obstacle to such a reform appears to be a lack of political leadership, which is perhaps understandable when the public focus is on individual elements of the tax system rather than on the whole.'