The chief of the CBI made a withering attack on the Government yesterday, warning businesses that higher taxes could be in the pipeline as it sought to boost its coffers before a general election.

Richard Lambert, the CBI’s Director-General, said in Edinburgh yesterday that the Government, which was “on the back foot” and “apparently short of confidence”, would struggle to win votes after this year’s economic downturn.

He gave warning that as a result, it might impose a heavier tax burden on business to help to fund extra vote-winning policies.

“The public finances will not permit the Chancellor to pull out much in the way of preelection goodies,” Mr Lambert said. “The Government might be tempted to see business both as a scapegoat for the economic slowdown and as a way out of its fiscal tight spot. A source of extra tax revenues that could help paper over some of the immediate political difficulties.”

There are rising fears that an increase in business taxes may further dent the UK’s attractiveness to companies. The CBI said tax changes that came into force this month would increase companies’ tax bills by £4 billion over the next three years.

“Business taxes . . . are not borne by a small band of fat cats or by some anonymous entity called a company. The costs . . . fall directly on employees, customers and savers,” Mr Lambert said.

This week Shire, one of Britain’s biggest pharmaceutical companies, announced that it was moving its headquarters to Dublin to reduce its tax bills. The drug company was concerned about a possible government crackdown on corporation tax payments on profits from offshore subsidiaries.

It is understood that several other FTSE 100 companies with overseas interests may follow suit. The Irish tax authorities do not charge corporation tax on overseas subsidiaries.

However, Mr Lambert sounded a more positive note on the economy, saying that, while the business outlook in London was “doom-ridden”, the wider economy was more bouyant.

He singled out the strong performance of the Scottish economy, in which house prices were still rising and unemployment was below the UK average. “Out in the real economy, lots of businesses are still doing fine, thank you very much. The way things look now, the Scottish economy – like that of the UK as a whole – is heading for a soft rather than a hard landing. And we mustn’t talk ourselves into something worse.”

Last month the CBI said that the economic slowdown was set to last into next year and could prompt recession-like conditions.