A view of the City of London, from the far side of the River Thames. Photograph: Getty Images.
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A lack of trust: addressing the "trust deficit" facing UK businesses

Trust in banks and businesses has was severely hampered by the financial crisis - and has yet to recover. The mistrust cuts both ways. How can we expect a recovery without support for business from politicians and the public?

The financial crisis that seized the developed world in 2008, sending shock waves through markets and plunging the world into a prolonged recession, did more than wreak socio-economic havoc: it significantly eroded trust between politics, business and the media. By inference, the public’s trust of politics, business and the media has been negatively impacted and a series of scandals involving each of these key pillars of society has enforced this sense of mistrust and created schisms between these institutions, driving a rift between them and the public. The importance of trust cannot be underestimated: it is an essential component of a flourishing democracy and economy. Without trust, investment is severely hampered and growth is strangled before even the "green shoots" appear. The dearth of trust is one of the major issues facing society today.

A recent research report conducted by Populus, commissioned by DLA Piper, has found that multiple trust "deficits" exist in our society. Moreover, the lack of trust between the three aforementioned "estates" is not only deeper now than back in 2011, when the inaugural Trust report was published, but it is wider too, with diverging ideologies splitting political parties, the phone hacking scandal afflicting the fourth estate, and the manifold recent negative stories stemming from the business community, particular from the financial services and energy sectors, appear to have tainted the reputation of all private enterprise. It is clear that trust between business, politics and the media has now broken down completely.

"Trust in business" remains at the forefront of the political agenda. Westminster remains committed to addressing what is perceived to be widespread malpractice among businesses - from energy firms hiking prices to PPI mis-selling – all to the detriment of the consumer. There is a view that non-financial services businesses are increasingly resenting being tarnished by the same brush the media and politicians have used to smear the reputation of banks over the past few years. Businesses have not necessarily addressed this negative perception in a particularly proactive manner. While there is acknowledgement that the financial crisis has been a torrid time for businesses, there is little sign that corporate behaviour is changing in any meaningful way. In other words, it’s business as usual for most businesses, who do not see themselves as the source of the "trust deficit" problem. With one influential media commentator opining that there should be a "bankers wing" at Ford Open Prison, the lack of awareness shown by some businesses is pretty surprising.

While public outrage, manifested through politicians, media and populist movements, being directed at certain business malpractices is understandable, it has led to an unhealthy overarching anti-business mood, which is hampering a sustainable recovery in the UK. This lack of trust cuts both ways. If businesses are viewed by the majority of politicians with deep scepticism then the feeling is mutual, with a growing sense in the business community that politicians and the media simply do not understand capitalism. This is particularly the case with politicians, who can be viewed as being devoid of business experience and accused of drawing ill-informed and uphelpful conclusions, which has hampered UK growth and the international reputation of UK plc. As a corollary to this, political messages are seen by business and the media as being opaque and often contradictory.

What can businesses do to address this trust deficit? A good start would be to make more noise about the myriad ways in which British businesses should speak out more and deliver positive messages which show that they are a force for good. It is clear that businesses expect industry organisations such as the IoD and the CBI to do more in this regard, but businesses themselves should also be promoting the virtue of capitalism and the benefits it brings. Schools have a role to play in explaining the value of commercial activity and countering any cultural problem with success. Business needs to re-evaluate its social responsibility and pro bono activity accordingly. Only through a concerted effort involving all stakeholders can this critical issue be addressed and, through exploring the areas where trust has broken down, solutions for the long term formulated.

Co-CEO of DLA Piper

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The Conservatives have failed on home ownership. Here's how Labour can do better

Far from helping first-time buyers, the government is robbing Peter to pay Paul

Making it easier for people to own their own first home is something to be celebrated. Most families would love to have the financial stability and permanency of home ownership. But the plans announced today to build 200,000 ‘starter homes’ are too little, too late.

The dire housing situation of our Greater London constituency of Mitcham & Morden is an indicator of the crisis across the country. In our area, house prices have increased by a staggering 42 per cent over the last three years alone, while the cost of private rent has increased by 22 per cent. Meanwhile, over 8200 residents are on the housing register, families on low incomes bidding for the small number of affordable housing in the area. In sum, these issues are making our area increasingly unaffordable for buyers, private renters and those in need of social and council housing.

But under these new plans, which sweep away planning rules that require property developers to build affordable homes for rent in order to increase the building homes for first-time buyers, a game of political smoke and mirrors is being conducted. Both renters and first-time buyers are desperately in need of government help, and a policy that pits the two against one another is robbing Peter to pay Paul. We need homes both to rent and to buy.

The fact is, removing the compulsion to provide properties for affordable rent will be disastrous for the many who cannot afford to buy. Presently, over half of the UK’s affordable homes are now built as part of private sector housing developments. Now this is going to be rolled back, and local government funds are increasingly being cut while housing associations are losing incentives to build, we have to ask ourselves, who will build the affordable properties we need to rent?

On top of this, these new houses are anything but ‘affordable’. The starter homes would be sold at a discount of 20 per cent, which is not insignificant. However, the policy is a non-starter for families on typical wages across most of the country, not just in London where the situation is even worse. Analysis by Shelter has demonstrated that families working for average local earnings will be priced out of these ‘affordable’ properties in 58 per cent of local authorities by 2020. On top of this, families earning George Osborne’s new ‘National Living Wage’ will still be priced out of 98 per cent of the country.

So who is this scheme for? Clearly not typical earners. A couple in London will need to earn £76,957 in London and £50,266 in the rest of the country to benefit from this new policy, indicating that ‘starter homes’ are for the benefit of wealthy, young professionals only.

Meanwhile, the home-owning prospects of working families on middle and low incomes will be squeezed further as the ‘Starter Homes’ discounts are funded by eliminating the affordable housing obligations of private property developers, who are presently generating homes for social housing tenants and shared ownership. These more affordable rental properties will now be replaced in essence with properties that most people will never be able to afford. It is great to help high earners own their own first homes, but it is not acceptable to do so at the expense of the prospects of middle and low earners.

We desperately want to see more first-time home owners, so that working people can work towards something solid and as financially stable as possible, rather than being at the mercy of private landlords.

But this policy should be a welcome addition to the existing range of affordable housing, rather than seeking to replace them.

As the New Statesman has already noted, the announcement is bad policy, but great politics for the Conservatives. Cameron sounds as if he is radically redressing housing crisis, while actually only really making the crisis better for high earners and large property developers who will ultimately be making a larger profit.

The Conservatives are also redefining what the priorities of “affordable housing” are, for obviously political reasons, as they are convinced that homeowners are more likely to vote for them - and that renters are not. In total, we believe this is indicative of crude political manoeuvring, meaning ordinary, working people lose out, again and again.

Labour needs to be careful in its criticism of the plans. We must absolutely fight the flawed logic of a policy that strengthens the situation of those lucky enough to already have the upper hand, at the literal expense of everyone else. But we need to do so while demonstrating that we understand and intrinsically share the universal aspiration of home security and permanency.

We need to fight for our own alternative that will broaden housing aspirations, rather than limit them, and demonstrate in Labour councils nationwide how we will fight for them. We can do this by fighting for shared ownership, ‘flexi-rent’ products, and rent-to-buy models that will make home ownership a reality for people on average incomes, alongside those earning most.

For instance, Merton council have worked in partnership with the Y:Cube development, which has just completed thirty-six factory-built, pre-fabricated, affordable apartments. The development was relatively low cost, constructed off-site, and the apartments are rented out at 65 per cent of the area’s market rent, while also being compact and energy efficient, with low maintenance costs for the tenant. Excellent developments like this also offer a real social investment for investors, while providing a solid return too: in short, profitability with a strong social conscience, fulfilling the housing needs of young renters.

First-time ownership is rapidly becoming a luxury that fewer and fewer of us will ever afford. But all hard-working people deserve a shot at it, something that the new Conservative government struggle to understand.