Clinical psychologists have criticised a Labour peer over a piece of research that claimed failed relationships and physical and mental illness were bigger causes of misery than poverty.

The "Origins of happiness" study minimised the social context of mental health, said campaign group Psychologists Against Austerity (PAA), while an academic said it let politicians and austerity "off the hook".

The London School of Economics study, led by Lord Richard Layard, was published in early December. It made the claim that eliminating depression and anxiety would be a cheap way to reduce misery by 20 per cent, while eliminating poverty would be more difficult — and, besides, it would only reduce unhappiness by 5 per cent.

PAA condemned the stark dichotomy presented in the report between income and mental illness as predictors of life satisfaction.

In a response published online, the group, which is made up of practicing mental health professionals, highlighted the fact "some media reports have gone further, apparently taking the results to imply that there is no causal relationship between poverty and mental illness", and blamed the researchers for not making the complex relationship between poverty and mental health clearer. According to the psychologists the two things "are related in a complex variety of ways, with both causally influencing the other".

The anti-austerity group said it was easy for the researchers to downplay the link in their findings, because the relationship is not as simple as happiness being dependent on income alone. "Living in poverty is more stressful, with fewer buffers, so challenges are more likely to be catastrophic," their statement said. "People living in poverty have less agency and control over their lives, and live with lower status, often accompanied by stigma, powerlessness and shame."

Lord Layard's study pointed out that as UK average incomes have increased, the country has not got happier. But PAA pointed out that in addition to becoming richer, Britain has also become a more unequal society since the 1980s.

The original study states that relative poverty is more important than absolute poverty in mental health terms, but does discuss this in detail.

Individual psychologists and academics appeared to agree with the anti-austerity group's statement.

The study "lets politicians off the hook, it lets austerity off the hook" by treating mental illness as if it exists in a void and is not intrinsically linked to societal factors, director of clinical psychology at Canterbury Christ Church University Dr Anne Cook told the Guardian.

"It says that all that doesn’t matter, making a better society doesn’t matter, just offering technical treatments,” she said. “I am one of the people that offers technical treatments and I think they can be extremely helpful to some people but that argument is being stretched beyond the point at which it applies.”

Some aspects of the report have been welcomed by the mental health community, however, such as a call for the government to invest more in treating mental illness.

“There are many aspects of the Origins of Happiness preliminary report that should be celebrated," PAA said, to preface to their response. "We are pleased to see mental health being given such prominence, and a public mental health agenda being promoted."

Dr Peter Kinderman, president of the British Psychological Society, also said he welcomed Lord Layard’s call for a focus on national wellbeing through investment in mental health services. But he added, speaking to the Guardian, that he had misgivings about how the study had treated mental illness as a distinct variable from human misery.

The LSE study has worried psychologists because Lord Layard is highly influential with policymakers. The Labour peer's recommendations previously led David Cameron to adopt national wellbeing statistics, and Lord Layard was also a driving force behind the Improving Access to Psychological Therapies (IAPT) scheme to increase access to “talking therapies” on the NHS.

That latter policy was particularly controversial because it established finding work as an outcome of psychological treatment. PAA have previously called aspects of the scheme's implementation "profoundly disturbing", attacking 2015 plans by then-chancellor George Osborne to link welfare and therapy by placing IAPT therapists in job centres.

Lord Layard, who is an economist rather than a psychologist, is now calling for a “new role for the state” that "swaps wealth creation for wellbeing creation" through targeted mental health interventions.

Dr Jay Watts, a clinical psychologist, told the Guardian his call “negates decades worth of data linking mental health to poverty”.

“It’s ripe for misuse … in the current political climate,” she added.

Ms Cook said there were better ways to improve wellbeing than by focusing on isolated mental health interventions. Policy should take a more holistic public health approach, she suggested.

“Cholera wasn’t eradicated by developing new treatments, it was eradicated by improving drains back in pre-Victorian times,” she said.

“What [Layard] neglects is the people at the bottom of the pile who are really, really struggling, and in current circumstances there are a lot of them. People who you see at food banks for example, who are in incredible distress and certainly would – most of them or a lot of them – meet the criteria for an anxiety disorder or depression.

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“But it’s largely a response to their circumstances. If we do something about that, rates of mental illness in the population are going to come down a lot more effectively than providing a lot more therapy.”

Meanwhile, PAA suggested that rather than doing nothing to help the most disadvantaged people, the study could actually contribute to perpetuating poverty.