Chandrashekhar Krishnan is executive director of Transparency International UK.
The British are hardly the only ones who have long thought that Britain — birthplace of modern finance, law enforcement, the most widely imitated democratic system in the world, and even the very notion of "fair play" — is in a position to advise everyone else on corruption and governance. Indeed, the country ranks 20th out of 178 countries — two spots ahead of the United States — on Transparency International's 2010 Corruption Perception Index. Its stable governance and generally robust institutions and democratic traditions make it the envy of many other countries.
At least that was the case until this month, when a long-simmering phone-hacking controversy centered on Rupert Murdoch's News of the World tabloid erupted into a full-blown scandal, badly tarnishing not only a section of the British media but also Scotland Yard and, it appears, the British government. The whole affair has revealed that Britain is hardly immune to problems more often assumed to be the particular curse of developing countries rather than developed ones. The governments that have been on the receiving end of British lectures on corruption in international forums like the United Nations, the Commonwealth, and the G-20 are probably enjoying the spectacle.
But in fact, this is not the first time in recent memory that the fragility of Britain's institutional defenses against corruption has been exposed. In June, the organization I lead, Transparency International UK, published a report examining the level of corruption across 23 British sectors and institutions, including all those affected by the phone-hacking scandal. Our public opinion survey found a disturbing erosion of faith in institutions. Fifty-three percent of respondents believed that corruption had increased either a little or a lot in Britain in the last three years; only 2.5 percent believed it had decreased. Forty-eight percent of respondents did not think the government was effective in tackling corruption, and while nearly 93 percent wanted to report corruption, only 30 percent knew where to report it.
This public mistrust has been built on a steady drip of scandals in recent years. In 2006 and 2007, Scotland Yard undertook a major criminal investigation into claims that an 86-year-old law banning the sale of peerages and knighthoods had been broken by the Labour Party, which had allegedly nominated individuals for peerages in the House of Lords in exchange for donations and loans. No charges were ever brought, but the scandal reinforced public fears that the system of funding political parties was corrupt — this in a country that, unlike many other major democracies, has been confident enough in the integrity of its politicians that it has never imposed a ceiling on donations to political parties.
In December 2006, the British government prematurely closed a major investigation by its Serious Fraud Office into allegations that bribes had been paid by BAE Systems to secure a huge British-Saudi defense contract in the 1980s. The government justified its action on the grounds that Britain's national security was threatened. Critics argued it was putting economic interests before the rule of law and undermining the OECD's Anti-Bribery Convention, which requires all parties to prosecute bribery of foreign public officials without being swayed by diplomatic or economic considerations. (It did not help matters that, at that time, Britain had failed to modernize its anti-bribery laws despite repeated OECD criticism.)
Then in 2009, Britain's Parliament, historically admired all over the world for its high standards and competence, found its reputation in tatters after a disturbingly large number of members of Parliament (MPs) were found to have padded their government expenses. One MP had quietly billed the public for repairing his tennis court; another was forced to resign after it emerged that he had used £1,645 ($2,700) in government funds to build a house for ducks on his property.
But Britain's problems aren't limited to corruption at home — it is also guilty of exporting and facilitating it abroad. British authorities have only recently started prosecuting British companies for paying bribes to foreign public officials. And despite tightening defenses against money laundering, corrupt foreign dictators and officials are still able to find a safe haven for their illicit wealth in the banking centers of the City of London and Britain's overseas territories. It is estimated that £48 billion ($79 billion) is laundered through Britain each year. Some three-quarters of British banks sampled by the country's Financial Services Authority in 2010 and 2011 were found to have failed to manage their relationships with high-risk customers effectively, leaving them open to money laundering.
The phone-hacking scandal, in its sheer scope and reach across both the public and private sectors, has pushed corruption and ethics issues to the fore like no other recent incident. One important lesson is that major British institutions, both public and private, are increasingly vulnerable to corruption: This scandal alone has shone an unfriendly spotlight on the media, the police, politicians, and the regulatory system.
Yet several anti-corruption oversight structures are being hastily dismantled or severely cut back under current government austerity plans — even as the scandal has shown us how ill-equipped the British government already is to respond to a corruption crisis of this breadth. The government has an official "overseas anti-corruption champion" (the secretary of state for justice), but no individual or institution with the remit to coordinate a meaningful response to malfeasance at home.
The scandal should also force a much-needed review of practices that have been taken for granted for many years, such as the willingness of politicians to accept corporate and media hospitality and revolving-door employment and all the conflicts of interest that come with such arrangements. Britain has grown shockingly complacent about corruption, allowing a culture of impunity to develop in which malfeasance is not seriously investigated and individuals have behaved unethically in the belief that they would not or should not be held to account. It is notable that with each high-profile resignation during the past few weeks, the individuals in question have denied any ethical shortcomings.
In 1994, following another political crisis in which some MPs were allegedly bribed to put down parliamentary questions on behalf of clients, then-Prime Minister John Major established a committee to advise the government on standards in public life. The committee's first report established seven principles of public life: selflessness, integrity, objectivity, accountability, openness, honesty, and leadership. The British political establishment, police, and media would benefit from a crash course in these tenets. They need the courage to admit that many checks and balances have failed and that the country that prides itself on holding the rest of the world to account badly needs to get its own house in order.