That’s leadership?

The Institute of Directors (IoD) needs to get real (your report and editorial, 3 October).

To reduce the current UK corporation tax to an eye-watering 15 per cent from the current 26 per cent (to be 25 per cent from April 2012) would involve a huge drop in tax income for the nation –which would automatically mean that the government would have to borrow more from the markets.

Is the IoD seriously suggesting the government shoots itself in the foot with an initiative that would put itself under pressure to borrow more? Is it not aware of what has happened in Greece, Ireland, Portugal and many other countries, where the government spending far outstrips government income?

No doubt its argument is that this will have an overall positive effect by kick-starting the economy and jobs to such a degree that the lower rate applied to a much higher level of profitable economic activity brings in more money.

But Ireland, for example, with its 12.5 per cent rate, is a country that clearly shows this to be a false premise. Between 2008 and 2009 corporation tax revenue in Ireland dropped from €5.07 billion to €3.9bn (almost 25 per cent down), and total revenues over the same period were down from €41.62bn to €33.88bn (almost 20 per cent down).

Its need to borrow at sky-high rates correspondingly rocketed, leading to its euro bail-out, generously supported by the UK.

But the UK is not Ireland – and the UK tax income is around £550bn (around €630bn) and like the proverbial oil tanker cannot be turned around overnight, if indeed at all, with the suggested scale of step-up needed to make the IoD figures work.

Even if it did attract inward investment from growing economies like India and China, this would inevitably take time, and would it be sustained or, more likely, hot-money, here today, gone tomorrow when the loss-leading rate was (sensibly) withdrawn at a later date?

If we can’t rely on the voice of the directors of UK companies to talk sense, maybe we are in a bigger pickle than we imagine. They’ll be asking for Boris Johnson to lead the Tory Party next.

Graeme Allan

Easter Warriston

Edinburgh