CBI warns Nicola Sturgeon higher taxes will damage Scotland and should be avoided

The Scottish economy “simply can’t afford” Nicola Sturgeon’s plans to create a higher income tax regime than England and the move “should be avoided at all costs”, the UK’s most eminent business group has warned.

The CBI said that a “chasm” opening up between tax rates north and south of the Border would make investors “think twice” about coming to Scotland and squeeze household incomes “at a critical juncture.”

In a submission to Derek Mackay, the SNP Finance Minister, ahead of next month’s Scottish Budget, the business group called for “parity of income tax” with the rest of the UK.

Mr Mackay rejected proposals to extend business rates to leisure and cultural venues run by council arm’s-length bodies (ALEOs), which the Tories had called a “swim tax”.

But the CBI, the members of which employ 500,000 people in Scotland, joined four other business groups in urging Mr Mackay to copy the Chancellor’s move for England last week to lower the annual rate at which the levy increases.

Scottish Engineering, Scottish Property Federation, Scottish Retail Consortium and the Scottish Tourism Alliance united in a call for him to link rises to the Consumer Price Index (CPI) rather than the existing measure of the Retail Price Index (RPI).

They warned that failing to act would put Scottish companies at a “competitive disadvantage” compared to English firms worth between £25 million and £30 million next year.

This is being used as the basis of Budget discussions between her minority government and Holyrood’s opposition parties. A deal is thought to be most likely with the hard-Left Greens, who want even steeper increases for middle and high earners.

But Hugh Aitken, CBI Scotland’s director, said: “On income tax and business rates, we simply can’t afford for a chasm to open up between Scotland and the rest of the UK if we want to remain competitive.

“Variance across the UK would make it more difficult for our businesses to attract and retain talent they need and could make investors think twice about setting up shop here in Scotland.”

He concluded: “Make no mistake, this Budget comes at a critical juncture for the Scottish economy. Moves which would make Scotland less competitive or less attractive must be avoided at all costs.”