PEOPLE and money will move from

Scotland if the country has any

“disadvantages” relative to the rest of the UK in terms of its tax system, the director-

general of the Confederation of British Industry has warned.

Carolyn Fairbairn’s comments, in an interview with The Herald ahead of the CBI’s Scottish annual dinner in Glasgow last night, come hard on the heels of a signal from First Minister Nicola Sturgeon in this week’s Programme for Government that income taxes could be raised to fund public services.

Ms Fairbairn also observed “green shoots” and “resilience” in Scotland’s key oil and gas sector but declared: “It is still

a very tough time for our oil and gas members.”

Highlighting her view that Scotland had to be able to answer “loudly and clearly” the question of why people should invest in the country, Ms Fairbairn said: “Keeping Scotland attractive in terms of other parts of the UK is going to be very, very important.”

She added: “This is about competitiveness within the UK, as well as globally. Any disadvantages Scotland has, compared with other parts of the UK, in terms of its tax system, people and money will move.”

Ms Fairbairn observed that Scotland had been “fantastically good at...attracting strong professional services companies here”. She cited financial services groups as an “obvious example” in this context.

And, observing the wide choice for people in the fast-growing financial technology sector in terms of where they based themselves, she added: “Fintech in Edinburgh and Glasgow is very strong. These are individuals who are footloose.”

In this context, she highlighted the importance of “keeping Scotland attractive” as a place to live and bring up children.

The Scottish Government has used its income tax powers to implement a lower threshold for the 40p rate, which means people fall into this band at a lower level of income than taxpayers elsewhere in the UK.

Asked if she had a view on Scotland’s lower 40p tax band threshold or on any plan to raise income tax, Ms Fairbairn replied: “In terms of the specific tax policy, I think we are not commenting at the moment.”

Asked about the oil and gas sector, Ms Fairbairn noted “nobody is suddenly going to be able to magic a higher oil price”.

However, she said of Aberdeen: “What I would say there is, if you go up to Aberdeen and see what is happening, it is extraordinary how much innovation is going on in that part of Scotland. The skills base is really strong. You have many tech firms coming in there. It is actually quite exciting.”

Ms Fairbairn added: “There is a lot of retraining going on.”

On Brexit, Ms Fairbairn welcomed what she sees as an “all-party commitment” now to a transition arrangement, although she emphasised: “It hasn’t been negotiated yet.”

She declared uncertainty relating to Brexit was beginning to affect investment.

Ms Fairbairn said: “We are seeing investment being affected. It is inevitable because we are heading into the window where pharma companies, manufacturers are making decisions about future investment, and uncertainty is toxic.”

She noted the CBI did not have members saying “try to turn the clock back” on Brexit.

Ms Fairbairn added: “Businesses know it will happen. They just want it to be done well, with as much certainty as possible.”

She called for transition arrangements to be confirmed as quickly as possible, and an early move on to trade talks with the EU.