This is the sixth in a series of essays from the Rt Hon Kit Malthouse MP on how to fix the British economy. You can read the other instalments in the series here:
- Growth is the Child of Capital
- Ownership and Nationhood: The Fight for Economic Belonging
- We need a competition revolution – here’s how we do it
- Unaccountable institutions have led our economy astray
- Children are at the heart of our economic growth
In my recent series of essays for CapX, I set out five pillars for a Conservative economic strategy: freeing capital, broadening ownership, restoring competition, reforming institutions and helping families to grow. Each addresses something concrete and measurable. But this sixth pillar is different. It concerns the atmosphere that surrounds all economic life – trust. Trust that rules are fair, that effort is rewarded and that institutions are on the side of those who are honest. Without it, even the strongest foundations falter. Restoring trust is not an accessory to growth; it is a precondition.
Quietly, steadily, Britain has become a country where people no longer believe the system can be trusted, that rules are enforced or that doing the right thing pays off. That matters – not just morally, but also economically. High-trust economies grow faster, invest more and work better. If the Conservative Party is to reclaim its historic role as steward of a healthy economy, we must put trust back at the centre of our mission.
This is not about vague sentiment. Trust is measurable. It’s an economic lever. And right now, that lever is slipping from our grip.
Speak to any small business owner trying to get a loan. Any young family baffled by the thicket of ID checks required to open a bank account. Any pensioner who’s been scammed and seen no justice. The feeling is the same: the system is rigged against the honest and the law-abiding, and tilted toward the clever, the connected and the cynical.
Over the last three decades, we’ve built a bureaucracy of suspicion. Almost every financial transaction now demands a passport, a utility bill and a ritual dance through verification systems that treat everyone as a potential criminal. We were told these rules would drive down fraud. Instead, fraud has exploded. Losses through fraud reported by UK Finance for 2023 alone totalled £1.17 billion. Broader assessments, such as BDO’s fraud tracker, estimate that total reported UK fraud in 2023 amounted to £2.3bn. And when scams are included, the true figure soars – the Global Anti-Scam Alliance and Cifas report that individuals in the UK lost £11.4bn to scams over the last year. Most fraud goes unrecorded, uninvestigated and unpunished. The truth is that fraud has become Britain’s everyday crime: the most common offence in the country and the least feared by criminals. And we’re not fighting it; we’re facilitating it.
Other countries have shown what’s possible. Sweden, the Netherlands and Singapore all top international rankings for both institutional trust and economic performance. In Sweden, a deeply ingrained culture of transparency and swift justice supports business confidence and fosters entrepreneurship. The Netherlands’ emphasis on clear regulatory frameworks and strong legal enforcement has made it one of the most attractive countries for investment in Europe. Singapore, renowned for its zero-tolerance approach to corruption and efficient legal system, has built a reputation as a global financial hub where businesses can operate with security and predictability. In each case, the lesson is the same: when rules are clear and enforced consistently, and corruption is ruthlessly tackled, trust flourishes. Businesses can take risks, investors feel secure and the public can transact with confidence. Why? Because people believe rules are real, cheaters get caught, and responsibility means something.
The OECD has shown that higher trust in institutions is a powerful driver of economic growth – with studies suggesting that even modest increases in trust can translate into meaningful gains in GDP over time. That’s not theoretical – it’s actual wealth, actual jobs and actual investment. The World Bank, too, has underlined how trust lowers transaction costs, increases compliance and deepens capital markets.
Contrast that with lower trust economies, such as the UK’s, where hesitation seeps into every decision. People think twice before investing, hiring or even changing jobs. Risk becomes something to be avoided, not embraced. Innovation slows, enterprise shrinks and the daily transactions that keep an economy alive grow fewer and more fragile. Without trust, the energy of economic life drains away – not just from boardrooms and banks, but from every shop floor, every household, every individual calculation about the future.
It would be easy to blame this on social media or globalisation. But much of the damage has been self-inflicted. Consecutive UK governments, including our own, have made a series of well-intentioned but ultimately misguided moves that have corroded economic trust.
We’ve mistaken rulemaking for enforcement. We keep passing new laws and compliance requirements, but we don’t back them with muscle. That’s why fraudsters get away with billions while legitimate businesses drown in paperwork. We’ve outsourced responsibility across agencies, leaving victims of economic crime passed from pillar to post. The police, under-trained and under-resourced in financial crime, treat it as a low priority. And so it festers.
We’ve allowed the insolvency regime to become a joke. In the hope of encouraging entrepreneurship, the UK deliberately created a softer insolvency environment over recent decades. Personal bankruptcy was de-emphasised, and company failures were made easier to manage with lighter scrutiny. The theory was that a more forgiving system would encourage risk-taking, innovation and dynamism.
But the reality has been far different. Instead of empowering the next generation of wealth creators, it has enabled the cynical to game the system. Directors rack up debts, walk away from their obligations and reappear a week later under a different company name. ‘Phoenixing’ isn’t rare anymore; it’s routine. Those who take reckless risks with other people’s money are often ‘done and dusted’ in no time, facing little real consequence. Bloomberg recently reported a 32% spike in company insolvencies. There is also mounting evidence that many insolvencies are structured to dump debts and liabilities while preserving operations. The reckless prosper at the expense of the responsible, while the providers of capital and debt retreat into caution.
Director disqualifications? They’re vanishingly rare. In 2023, just over a thousand directors were struck off – this in a country with over four million companies. The result is predictable: bad actors know they can get away with it.
Even our commercial courts – once the gold standard for resolving disputes – are buckling. Delays are growing, processes are arcane and the cost of pursuing justice is often prohibitive for all but the richest. Small businesses know this, and increasingly opt not to bother. That’s not rule of law – that’s the slow death of it.
One of the great paradoxes of our current system is where we choose to invest our enforcement muscle. HMRC has, over the past decade, grown steadily more aggressive in its pursuit of businesses. More inspectors, more demands, more investigations. Honest firms now live in fear of the taxman’s knock – complex compliance checks, retrospective penalties and lengthy audits that eat up time and money.
Yet where is the equivalent investment in fraud prevention and pursuit? Where is the task force that keeps criminals up at night? It’s hard to find. Economic crime units are underfunded, fragmented and reactive. The Insolvency Service operates with outdated tools and limited reach. There’s no strategic muscle behind deterrence – no culture of fear for those who abuse the system.
One of the most damaging tendencies of recent governments – ours included – has been a drift into gesture politics. Crackdowns announced with fanfare, regulatory tweaks designed to look tough, not be tough. The ID requirements for financial activity are a textbook case. We made life harder for the compliant majority, while the actual fraudsters – sophisticated, fast-moving, digitally native – just stepped around the system. It looked good on paper. In practice, it has achieved nothing but frustration and delay. The rollout of anti-money laundering checks for small landlords is another example: vast compliance burdens placed on ordinary people, while the real criminals moved their money offshore, untouched.
Trust can’t be built with gimmicks. It comes from clarity, fairness and consequences. It comes from making sure the rules mean something.
If the Conservative Party wants to lead again on the economy, we must get serious about integrity. That means real reform, not optics.
First, we need to reframe fraud and economic crime as what it really is: a systemic economic threat. This isn’t just about catching criminals – it’s about safeguarding our financial infrastructure. Responsibility must shift to the Treasury, which must start treating public trust as an economic asset – as real and valuable as a bridge, a road or a railway. Investment in trust-building should be seen not as a cost, but as a foundation for growth. Just as we spend to maintain physical infrastructure, we must invest to uphold the legal and institutional frameworks that give people the confidence to act, to invest, to take risks. Strengthening trust is not a soft option; it is hard economic infrastructure, and it deserves the same strategic attention.
Second, economic crime demands strategic coordination, data analysis and deep integration with the banking sector. We need a dedicated Economic Crime Commissioner with teeth – someone who can compel action, marshal resources and drive results.
Third, the insolvency regime must be rebalanced. Insolvency was never meant to be an easy way out – yet that is what it has become. Pre-pack administrations, where a company is sold before creditors have any real say, must face objective, independent scrutiny. Under current rules, sales to connected parties require a report from an ‘independent evaluator’, but these evaluators are hardly supervised and administrators are under no obligation to follow their advice. Creditors remain effectively powerless. We need tighter controls, stronger oversight and a proper role for creditors in challenging insider deals. Personal bankruptcy, too, must be made more serious: a last resort, not a routine exit. The message must be clear – debts are obligations, not inconveniences – and a system that rewards evasion weakens the whole economy.
Fourth, we need to get tough on rogue directors. The current disqualification process is sluggish and timid. Investigations take years. Sanctions are minimal. We must streamline investigations, raise penalties and name and shame offenders. Limited liability is a privilege – it cannot be a license for recklessness.
And finally, our commercial courts need renewal. Justice delayed is growth denied. We must modernise processes, embrace digital hearings and make it easier for businesses to defend their rights. Speed matters. Transparency matters. A strong commercial court is not a side issue – it is a frontline economic asset. Where justice is swift and sure, enterprise flourishes. Where it falters, the economy withers. Invest in justice, and you invest in national prosperity.
The central Conservative insight has always been that systems matter. That without rules, there is no freedom; without responsibility, there is no prosperity. Right now, our economic system is not earning the trust of the people who depend on it. But it can.
This isn’t a call for revolution; it’s a call for repair. The good news is that trust, once broken, can be rebuilt – through action, through fairness and through leadership that show it understands that integrity is not a luxury, it’s the basis of growth.
If the Conservative Party is to offer a credible economic strategy for the future, we must place the restoration of trust at its heart. This is not just a pillar among others; it is the atmosphere in which all our other ambitions will either flourish or wither. Rebuilding trust – in people, in markets, and in the rule of law – is essential to the renewal of our economy, and to the renewal of our party itself.
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