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&#39Higher tax may lead to Scots exodus&#39

Scottish financial services companies could move south of the border if a tartan tax is introduced to pay for improved public services, a study warns.

The research, carried out by the Centre for Economics and Business Research, predicts that more comprehensive provision of long-term care, student funding and teachers&#39 pay in Scotland will precipitate a review of the Barnett formula, under which Scotland receives £5bn a year from Westminster.

The warning comes just two weeks before the Scottish Executive is to reveal its plans for LTC funding.

Scottish-based financial services companies have warned the Scottish Executive against using its power to raise income tax by up to 3 per cent to pay for increased public services.

Scottish industry sources are concerned that product providers south of the border will use higher taxes as a marketing tool, portraying Scottish firms as more expensive to do business with.

CEBR chief executive Douglas McWilliams says: “Scottish financial services firms have already threatened to decamp en masse to England. People in financial services are paid high salaries and would feel the cost of an increase.”

One Scottish industry observer says: “Representations have been strongly made to the Scottish Executive about raising a levy. The Scottish life companies want to see a level playing field across the UK.”

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