Wellbeing is not just about money – if you can see a tree you're likely to be happier, reveals latest government research

Deprived areas of the country do not contain the unhappiest citizens, research by the government revealed as official statistics showed that one in eight people were struggling to manage financially during the economic slowdown.

Speaking at the launch of the the latest release of data from the Office for National Statistics, David Halpern from the Cabinet Office pointed out that reported life satisfaction in Hartlepool was higher than in Blackburn despite similar levels of deprivation.

"Look at Rutland, which is similarly wealthy to Wokingham. Yet levels of life satisfaction are much higher. Rutland is built near lakes. So we think environment does make a difference to happiness. It seems that if you can see a tree you are happier," said Halpern, who leads the government's Behavioural Insights Team.

Happiness map of Britain. Click image to explore more data from the report

The ONS data showed life satisfaction had dipped slightly – in contrast to gross domestic product, which has risen since 2009.

Instead, researchers said real household actual income, which takes into account government spending, better reflected national happiness.

This measure grew between 2002 and 2008 but has fallen to near 2005 levels. However, many recognise that enhancement of wellbeing is about more than money. The ONS pointed out that mental health remains an important issue, with 20% of the population reporting "some kind of psychological distress". The former cabinet secretary Lord O'Donnell announced he would head a commission, funded by the Legatum Institute, to help work out what affected happiness.

Academics have long focused on measuring subjective emotions – usually through surveys. People consistently report that what determines happiness includes physical and mental health, the strength of family and community ties, autonomy and a sense of control over one's life, and leisure time.

Halpern said one had to consider "things like how well you know your neighbour and whether you commute". He pointed out that the government's National Citizenship Service, which aims to get together 300,000 16- and 17-year-olds for a month's group activities, had boosted "subjective wellbeing".

"It not only boosts the satisfaction of young people the volunteers are helping but also boosts the [satisfaction] of themselves. It makes them more interesting, more confident and happy young people and hopefully that will make them better at job interviews and have an economic impact."

Halpen said wellbeing data was making an impact on policy decisions. He pointed out that whether to shut down post-offices was now viewed differently by policy-makers. "The economic case is clear if you consider the subsidies poured into keeping post offices open but people realise that something else happens at a post office … where people meet."

As well as being a civil servant, Halpern is a respected thinker – and wrote a much-heralded book on happiness. He pointed out that in the future governments might not claw back amounts owed by citizens but instead pay out amounts owed to them. "A loss is borne much harder than a gain by people," he said.

Many prominent academics are concerned that government policy is heading in the wrong direction. Lord Layard of the London School of Economics criticised education reforms that singularly chase "intellectual achievement and behaviour".

Layard said: "In fact, a person's happiness is much more strongly related to their emotional health as a child. This is not a current focus in the educational system. Instead we are cutting back on child mental health services. We are struggling to develop support for a child's emotional side. It's clearly more important than intellectual achievement for happiness."

Layard's push highlights a political divide between those who favour growth at all costs and those who favour social stability and wellbeing.

Since 2008, when a report for the French government by economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi argued that governments should look at people's income and consumption to evaluate their "wellbeing" rather than at production to assess progress, countries have begun to use such measures to measure a nation's happiness. Countries including Chile, Australia and Bhutan have all taken happiness as a policy tool.

Andrew Oswald, professor of economics at Warwick University, said that in the next 20 years "happiness will have won out".

"This August, Ben Bernanke, the US Federal Reserve chairman, said that economics was about wellbeing … asking Americans how secure they feel in their jobs. For someone like me who has sat here for 20 years watching these debates it's nothing short of a revolution."