The British people are becoming less honest and their trust in government and business leaders has fallen to a new low amid fears that the nation is heading for an "integrity crisis".

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Lying, having an affair, driving while drunk, having underage sex and buying stolen goods are all more acceptable than they were a decade ago. But people are less tolerant of benefits fraud.

The portrait of a nation increasingly relaxed about "low-level dishonesty" emerges in a major study seen by The Independent. Carried out by the University of Essex, which will today launch Britain's first Centre for the Study of Integrity, it suggests that the "integrity problem" is likely to get worse because young people are more tolerant of dishonest behaviour than the older generation. The new centre will look at issues arising from recent scandals such as phone hacking, MPs' expenses and the banking crisis.

A separate "trust barometer", published by the PR company Edelman, shows that two out of three people do not trust politicians to tell the truth. Trust levels in MPs from all parties slumped by 36 points to 4 per cent after last summer's riots. People also lost confidence in the young and the police.

Only 29 per cent of people believe the Government is doing the right thing, while 38 per cent trust businesses and a surprisingly low 42 per cent trust non-governmental organisations. "There is a chasm between the public's expectations of government and what they think is actually being delivered," said Ed Williams, boss of Edelman. "The vast majority [68 per cent] think the country is on the wrong track."

The Essex University study found that in 2000, 70 per cent of people believed an extramarital affair could never be justified; today, the proportion is about 50 per cent. The proportion of people who say picking up money found in the street is never justified fell from 40 per cent to 20 per cent. Lying and breaking the speed limit have also become an accepted part of life. Fabricating a job application and having an affair are less acceptable, but many people do not rule them out.

According to the Essex study, women have slightly more integrity than men. There appears to be little variation in honesty according to social class, education or income. But there is a significant age factor: younger people are far more likely to tolerate dishonesty. Only 33 per cent of under-25s thinks lying on a job application is never justified, compared with 41 per cent of middle-aged people and 55 per cent of those over 65.

The report's author, Professor Paul Whiteley, who will direct the new centre, believes there might be a "life cycle" effect in which people become more honest as they age. However, he points out that other research suggests people learn honesty or dishonesty in their formative years and this will not change very much as they get older.

"There are reasons to be pessimistic about this, since people tend to acquire their basic political beliefs in adolescence and these do not change very much as they grow older," the report says. "If integrity is anything like political values, then it is likely to decline in future as the norms which sanction such behaviour weaken further. This will be more likely if new cohorts of young people learn to be even more dishonest than at present."

Comparing the latest findings with similar research in 2000, Professor Whiteley says: "It is apparent that large changes have occurred in sexual mores, attitudes to keeping money found in the street, and to smoking cannabis. These activities are much more sanctioned than they were 11 years ago."

There have been smaller but significant changes in attitudes towards failing to report damage to a parked car, buying stolen goods and drink-driving, which earn less disapproval than they did in 2000. The only transgression of which people are less tolerant is cheating on benefit claims. The proportion condemning the practice has risen from 78 per cent to 85 per cent. "This may reflect a growing hostility to welfare fraud at a time of economic austerity in comparison with the years of relative prosperity of the late 1990s," says Professor Whiteley. "It appears Britons are growing more and more tolerant of low-level dishonesty and less inclined to sanction activities which would have been heavily frowned on in the past."

There could be big implications for politics. Professor Whiteley, who has devised an "integrity test", see panel, said integrity levels mattered because there was a link between them and a sense of civic duty. If integrity continues to decline, he thinks it will be difficult to mobilise volunteers to support David Cameron's Big Society project.

"If social capital is low, and people are suspicious and don't work together, those communities have worse health, worse educational performance, they are less happy and they are less economically developed and entrepreneurial," Professor Whiteley said. "It really does have a profound effect."

The same trend could also deter people from voting, as a sense of civic duty is an important factor in explaining why people take part in elections.

"Individuals with a strong sense of integrity also feel they would be neglecting their duty if they did not vote," says the Essex study.

Vox pop: Do you consider yourself dishonest?

Paul Moriarty, 65, actor

Score in integrity test: 16

Recent example of dishonesty: I broke the speed limit.

How did you justify it? I did it because I could. If you know you're going to get away with it, you're going to do it.

How do you think things have changed in the past ten years? There's more hypocrisy at the top. Priests are up to no good, people haven't paid their taxes. We need the newspapers to put these people under pressure.

Ludivine Sorel, 28, waitress

Score: 22

Recent example of dishonesty: I have a nose piercing and my boss told me I had to remove the stud. I told him that I couldn't because the hole would seal up.

How did you justify it? It was a stupid rule, I should be able to wear what I want.

How do you think things have changed in the past ten years? I think things are getting worse. People don't respect each other any more.

Peter Jones, 42, newspaper vendor

Score: 22

Recent example of dishonesty: I broke the speed limit.

How did you justify it? It's no big deal, it didn't feel like I was breaking the law, not at all. I was fully confident of my ability to drive at that speed.

How do you think things have changed in the past ten years? I've definitely become more honest. I suppose maturity has a way of correcting that kind of thing.

Maria Moreno, 31, architect

Score: 18

Recent example of dishonesty: I stole a jacket not long ago. I was in a crowded shop. I realised I could get away with it.

How did you justify it? It was a well-known brand, so I thought they could afford it.

How do you think things have changed in the past ten years? I don't think things have changed.

Simon Young, 23, fundraiser

Score: 40

Recent example of dishonesty: I lied about putting the washing away to my girlfriend.

How did you justify it? What can I say? I'm a mean-spirited git.

How do you think things have changed in the past ten years? There's no such thing as dishonesty, it's contextual. If you have to steal £50 to stop someone blowing up a plane, it's justifiable.

Matt Willard, 24, recruitment consultant

Score: 19

Recent example of dishonesty: I told my girlfriend I was going to a friends for a quick drink, but then went out all night.

How did you justify it? I was lost in the moment. I did feel pretty guilty about it afterwards though.

How do you think things have changed in the past ten years? People are definitely less honest. Everyone is trying to take short cuts.

Vivian Williams, 26, product manager

Score: 14

Recent example of dishonesty: My friend was having a party. I was tired but I told her I couldn't go because I was ill.

How did you justify it? I was tired! I had to think about myself. If I'd told the truth she would have talked me into going.

How do you think things have changed in the past ten years? We're under a lot of economic pressure. When people feel squeezed, they're more likely to be dishonest. Then again, I don't think celebrity culture has helped, it has definitely led to a moral decline.

Interviews by Sam Judah