George Osbourne calls on Darling to cut taxes to stop UK firms fleeing the country

Shadow Chancellor George Osborne said Labour should match Tory plans to slash the main rate of corporation tax from 28p in the pound to 25p.

He was prompted to write an open letter to Alistair Darling after two more UK companies announced plans to relocate to Ireland, where corporation tax is just
12.5 per cent.

George Osborne MP (left) said Alistair Darling has 'caused confusion', and asked the Chancellor to adopt policies of reducing corporation tax as an initial step

Relocating abroad is a major and expensive operation but one of the firms, investment company Henderson Group, said the £4.5million cost would be offset by the tax benefits.

In his letter to the Chancellor, Mr Osborne wrote: 'It is further evidence of the damage done to the UK by the confusion you have caused in the last year over the future of our business tax regime.'

In 1997, Britain had the fourth lowest rate of corporate tax in the EU but now has the eighth highest.

Mr Osborne wrote: 'With companies leaving Britain, weakening an already ailing British economy, I urge you to adopt our proposals.

'This involves, as an initial step, reducing the main corporation tax rate from 28 per cent to 25 per cent.

'This would go some way towards undoing the damage the Government has done by failing to keep pace with European tax rates.'

He also called for the tax system to be simplified and said his plans would 'restore competitiveness'.

Four large British companies in the past five months have announced that they are shifting their operations to Ireland in a dramatic sign of the rising pressure on the Treasury to overhaul the tax regime.

On Thursday, Henderson and engineering firm Charter joined pharmaceuticals group Shire and United Business Media in switching their tax bases to Dublin.

Meanwhile, Regus, the world's largest provider of office space, said yesterday that it is moving its head office and tax base to Luxembourg, citing UK tax rules as one reason.

Taking the mic: Many companies are switching their tax bases to foreign countries such as Dubai as a way of saving money during the economy crisis

Heather Self, of tax accountants Grant Thornton, warned of concern that things had reached a ' tipping point'.

Roger Yates, chief executive of Henderson, predicted that other companies may follow its lead.

Charter chief executive Michael Forster said: 'We want the flexibility to be able to structure ourselves for tax. Ireland has a taxation regime that will allow us to manage the taxation of overseas subsidiaries.'

Gordon Brown and Tony Blair assiduously courted the City before Labour came to power in 1997 but it appears business has finally fallen out of love with the party.

Firms have been concerned over the constant dithering over tax, the Tories claim.

In his final Budget in 2007, Mr Brown announced a series of reforms to the taxation of foreign profits which were later dumped under pressure from the business community.

Mr Darling then backed away from plans to investigate the tax affairs of non-domiciles. And a new single rate for capital gains tax of 18 per cent - up from 10 per cent - was also later watered down.