One of Gordon Brown's top business advisers has warned the government that it needs to be "extremely careful" to ensure its tax policy does not inflict a "hugely damaging" blow on the UK's competitiveness.

In his first interview in his role as chairman of the prime minister's advisory business council, a week ahead of Alistair Darling's first Budget, Mervyn Davies, the chairman of Standard Chartered, sounded the alarm about the long-term effect of the Treasury's contentious changes to capital gains tax and the tax regime for wealthy non-domiciled foreigners.