Academic conference "Reforms through trust"

September, 29

Reforms Through Trust: A British Perspective

I thank the Ukrainian Catholic University for inviting me to take part in this 4^th Ecumenical Social Week in Lviv.  I got to know the University when I was British Ambassador to Ukraine from 2002 to 2006.  I remain a great admirer of its work.  This conference has given me the opportunity to come back to Ukraine for the first time since 2006, which is very welcome.  I should make clear from the outset that I am speaking as a private individual, not on behalf of the British Government.

After introducing myself, I want to explore today what we mean by trust in human society and how it can break down.  By way of illustration, I will consider some recent cases in Britain where trust has been damaged in the worlds of politics, business and the media, and then draw some wider lessons.

I will soon retire from the diplomatic service.  Over 34 years I lived and worked in the Soviet Union while Brezhnev was General Secretary, in Germany at the time of its reunification at the end of the Cold War, in Russia during Yeltsin’s second term as President, in Ukraine before, during and after the Orange Revolution and finally in Pakistan as it shifted from military rule back to civilian government.  Over the last 18 months I have been seconded to a big British food producer, Associated British Foods, which operates in 44 countries.  Over the years I have worked with politicians and business people, soldiers and journalists, in countries where trust between people is high and in countries where it is low.

It seems to me that the word “reforms” has been so over-used that it has become meaningless – or is used to mean whatever the speaker wants.  So I am going to focus on trust: the glue which binds humans together in society.  Trust is built slowly, but can be quickly destroyed.  It is normal for us to trust our family and close friends, although here too trust can be damaged or destroyed.  Where there is high trust in a society, our confidence spreads wider.  We rely on our teachers, doctors, business people, journalists, police, judges, politicians and ministers to use their positions of power and responsibility honestly and fairly.  In their decisions we expect them neither to fear the powerful nor to give special favours, but to apply one standard impartially to all, and to set a good example.

But we are all human.  As the English writer Lord Acton commented in the 19^th century: “Power tends to corrupt and absolute power corrupts absolutely.”  Given the opportunity, people everywhere take selfish advantage of power.  The best means to counter this natural tendency –apart from formation of conscience and exercise of virtue - are accountability and transparency.

The ancient Romans understood this.  The question “quis custodiet ipsos custodes?” – “who guards the guards themselves?” – sums up the issue.  For anyone in a position of power we should ask: “to whom does he or she account?”  Anyone with absolute, unaccountable, power is liable to become corrupt, however good his or her intentions.  The classic solution to this problem, as in the Constitution of the United States, is the separation of powers, between executive, legislature and judiciary, with a vigorous “fourth estate” in the media watching the others and increasing transparency. 

My country, the United Kingdom, without a written constitution, has been rather slow to separate some powers.  Until two years ago the House of Lords was both the upper house of the legislature and the highest court in the land.  But we now have a new Supreme Court, and it no longer falls to one man both to chair the upper chamber and to appoint senior judges.   We have also come later than others to some forms of transparency: both our Freedom of Information Act and the public acknowledgement of the existence of our security and intelligence services have come in the last 25 years.

Other examples of accountability are independent audits of businesses, or an independent regulator of the nuclear industry.  After the disaster at Fukushima earlier this year, Japan is making its nuclear regulator more independent of the nuclear industry.  Lack of independent accountability can lead to dire consequences.

Accountability can be buttressed by transparency.  There is a saying that “sunshine is the best disinfectant.”  As a rule, policy-making, law-making, court judgements and business decisions should be open to scrutiny and justified in public.  The media should be free to report and debate.  But not everything can be done in the public gaze.  There will always be a tension between a desire for openness and the requirements of national security, or preventing crime, or efficient conduct of business.  Wikileaks has gone to an extreme, in suggesting that everything should be open to public scrutiny.  In short, we need good and trustworthy people in positions of power, to make the right judgements, but we also need them to be accountable, to help keep them honest.

Now I will turn to three recent examples from Britain where trust has been damaged.

First, the parliamentary expenses scandal.  This erupted two years ago when a newspaper obtained details of the expenses which members of parliament had been claiming.  Some of them were extravagant.  One member claimed for the cost of building a duck house in his garden!  Some were questionable, like some of the claims for the costs of maintaining two residences, one in London and another in the member’s constituency.  Some were simply fraudulent - claims for non-existent expenses.  As a result several parliamentarians have been convicted and sentenced to prison terms.  Others did not stand in the general election in May last year or were not re-elected.

Of course not all members of parliament were guilty of these practices; indeed most were not.  Over the years their basic pay had been held down, for fear of antagonising voters.  Many members had come to feel entitled to top up their pay through expenses, whether those expenses were fairly incurred or not.  The whole sorry affair has damaged trust in all politicians, not just the guilty few, and so has damaged the very democratic process.  Politicians collectively have lost some of their moral authority to speak out as elected representatives. Parliament has now put in place an independent and transparent authority to scrutinise expenses.  This is more burdensome for the members of parliament.  But it will take a long time to rebuild the trust which has been eroded.

Second, the financial crisis.  London is one of the world’s principal financial centres.  The UK economy depends more than most on financial services.  So the global banking crisis, which started in 2008 and led to a global recession, has hit the UK hard.  (I know it hurt Ukraine even more.)  Some of our banks had to be rescued by the government.  In other words, British taxpayers collectively had to pay for mistakes of the bankers.  The government’s budget deficit widened to 12%.  The coalition government which took office in May 2010 had to impose an austere package of spending cuts and tax increases to close the gap.  There is now a painful process of reducing the debts which have accumulated.  All this will hurt almost everyone in the country for years to come.

What caused the financial crisis?  Most commentators agree that some banks lost sight of their basic functions of enabling payments, saving and lending.  They were distracted by clever and elaborate financial instruments, which brought risks which few people even in the banks themselves understood.  As a result, bankers collectively, both good and bad, have lost public trust.  There is still widespread anger in Britain at the disparity between the huge remuneration of many bankers and the sacrifices which most people are making, including ordinary bank employees. 

Internationally, new rules have been agreed which aim to ensure that banks have adequate capital to cope with such risks in future, without recourse to rescue by the taxpayers.  In the UK an independent banking commission has recommended that banks should not combine retail banking (payments, saving and lending for individuals and companies) with riskier investment banking.  The global financial crisis is an unusually clear case of the greed of a few destroying trust more widely and having a lasting impact on many.

The third scandal arose from the media.  It has also affected confidence in politicians and the police.  For some time there had been indications that a popular Sunday newspaper (The News of The World, owned by Rupert Murdoch’s News International) had been getting some stories by accessing the voicemail accounts of well known figures.   A journalist and a private investigator were tried and sentenced.  The newspaper’s editor at the time, who later became press spokesman to Prime Minister David Cameron, was forced to resign from that position. 

In July the story exploded into a major political crisis.  It became clear that The News of The World had hacked into voicemails not only of celebrities and politicians, but also of a teenage murder victim and the parents of a soldier killed in Afghanistan.  It also emerged that the newspaper had paid some police officers for information.  Parliament was recalled.  Rupert Murdoch decided to close the newspaper.  He and his son were summoned to give evidence before a parliamentary committee.  News International had to abandon its plan to take over the UK’s leading satellite television broadcaster, in which it already has a minority stake.  More people have been arrested.

The immediate scandal has cooled.  But trust in the tabloid press and in the police has been damaged.  There will now be a public inquiry, headed by a judge, into the behaviour of the media and their relationship with the police.

These are three recent examples from Britain of how trust can be damaged or lost.  But we could find examples in every society.  What do they tell us?

In each case some people have behaved badly: grasping parliamentarians, greedy bankers or uncontrolled journalists.  The misdeeds of the few have harmed trust in politicians, bankers and journalists as a whole.  They have also undermined confidence in the broader institutions of politics, finance and the media.  In Britain these institutions are strong enough to survive.  New regulations will be put in place, new checks and controls established.  Trust can be rebuilt.  But it will take longer than the time that was needed to do the damage. 

Of course there is nothing new about this.  The Roman historian Tacitus commented that: “It is found by experience that admirable laws and right precedents among the good have their origin in the misdeeds of others.”

No society is perfect.  Maintaining the trust which cements society together requires constant efforts, like the constant work needed to keep a house weather-proof.

The writer Morris West observed that: “None of us is guaranteed against failure or corruption of any kind; witness what’s going on in the world at this moment, the follies of human nature and the failures of human nature.”

What can we do?  We can, and should, promote the practice of virtue, of honesty, temperance, prudence and fortitude.  Human beings will still fall short.  So we can, and should, develop safeguards to hold those with power to account and ensure sufficient transparency.  In designing reforms, these are the ways to reinforce trust.

That is what we can do in this world.  One day, I believe, each of us will be called to account for what we have done in our life.  We will be exposed to a light from which we cannot hide.  Each of us needs to be ready for that day.