SOME TIME in the mid-1960s, when I was working on The Sunday Times, I had an unexpected invitation to have lunch with the chief executive officer of the Irish Dairy Board. It was accompanied by the information that he was a hero of Irish rugby, had played 29 times for the Ireland team, and was promoting Kerrygold, the board’s brand of butter. I knew little about the butter market or Irish rugby, so naturally I accepted. In any case, the lunch was to be held at the Connaught Hotel, which then served the best English food in London.

I was swept off my feet by the best salesman I have ever met. In this order, I became convinced that Kerrygold was the most creamy, golden butter ever produced, coming fresh from cows that had personally kissed the Blarney stone, that Ireland had just entered on an economic renaissance that would spread far beyond the dairy industry, and that one of the leaders of the renaissance would be my young interlocutor, Tony O’Reilly.

Since that lunch our paths have crossed only occasionally, though we served together on the board of the old GEC in the early 1990s. After 40 years one does not remember many business lunches, but I certainly remember that one. I am not sure about the market share of Kerrygold, but all the other forecasts, unlikely as they sounded at the time, have come true. Ireland now has a higher per capita income than the United Kingdom; Ireland has been the great economic success story of Europe. Tony O’Reilly is said to be the first billionaire Irishman. He ran the Heinz empire, very successfully, for 20 years. He now has his own, highly profitable, global business that stretches from newspapers to Wedgwood china.

Last week David Wighton, of the Financial Times, had lunch with Sir Anthony O’Reilly in Manhattan; the interview was published in Saturday’s FT magazine. It is all well worth reading, particularly for newspapermen; O’Reilly believes that newspaper prices in the UK market are too low. His own Independent ought to be priced at £1, rather than the present 70p; the FT ought to be £1.50, not £1.

Yet the key passage refers to tax. O’Reilly’s view is that the main reason for the Irish economic “miracle” has been the low level of corporate tax in Ireland. He is working to persuade the UK Government to reduce the rate of corporation tax in Northern Ireland to that of the south; that is, from the UK’s 30 per cent to the Republic’s 12.5 per cent. He comments that the Irish miracle is not “because the pubs are great, the golf is great and the climate is, well . . . the fact is, its tax.”

This is, indeed, one of the political truths that politicians ignore at their peril. O’Reilly’s “the fact is, its tax,” is just as valid as Bill Clinton’s “it’s the economy, stupid”. Of course, from the British point of view, there can be no question of cutting the Northern Ireland rate of corporation tax without cutting the UK level. If 12.5 per cent is good for the Republic — and it is — then indeed it would also be good for Northern Ireland. If it would be good for Northern Ireland it would be equally good for England, Wales and Scotland. Not only good, but essential.

Most politicians have little understanding of tax. They think it is easier to tax business because global businesses do not have votes. They do not realise that Ireland has found that lower tax rates produce higher yields. The result is that Conservative tax policies are inadequate, Liberal Democrat policies are self-defeating, and Labour’s are complex and perverse.

Politicians do not appear to understand that global businesses are free to arrange their tax affairs on a global basis. Most private individuals are still tied to the place in which they earn their living, though the genuinely rich can afford to live where tax is lowest. International companies, by definition, earn their profits internationally. They can, by and large, choose to place their headquarters in a low-tax jurisdiction. For instance, in the Republic of Ireland.

Business does have other considerations, including what might be called “business friendliness”, language, transport facilities, attraction to staff and the tax rates on staff. But the simple central issue is tax itself. From a cash-flow point of view, corporation tax is a dead loss that any competent businessman has a duty to minimise. A finance director who does not seek to minimise corporation tax gets fired — and rightly so. The easiest way for business to minimise tax is to move to a low-tax jurisdiction.

Obviously, a 30 per cent tax rate is less attractive to international business than 12.5 per cent. London has therefore become less attractive than Dublin. Like water running downhill, companies will move from London to Dublin, or to other low-tax countries.

There are numerous alternative locations, and it is impossible to prevent this drift abroad.

The latest information is that the outflow of international companies from Britain is accelerating. There are at least 40 major companies in the pipeline to move; the sums involved run into hundreds of billions of pounds. Last year Royal Dutch Shell consolidated its holding company in the Netherlands — that represents a capital value of more than £110 billion by itself. This drain will do far more damage to the UK economy than merely loss of tax revenue, though that is considerable. The real loss is the benefits these companies provide to our economy while they are here.

Sir Digby Jones, as Director-General of the CBI, has stated: “A lot of our biggest businesses are now looking at whether they want to be domiciled here because of the tax system. They are looking instead at Holland, Ireland . . . Estonia, even. That was never on the radar screen before. I fear that the Chancellor, in going after a few million of extra tax, will lose the Exchequer billions by driving companies out of Britain.” That is not just silly; it is suicidal.

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