Ministers are to introduce plain packaging for cigarettes along the Australian model with legislation this year, after becoming convinced that the branding is a key factor in why young people start to smoke.

The legislation, to be announced in the Queen's speech in May, is also expected to ban smoking in cars carrying anyone aged under 16 years. Ministers acknowledge that the ban is likely to be difficult for the police to enforce, but they believe peer group pressure will have an impact similar to the ban on drivers using mobile phones.

David Cameron referred to the possibility of introducing plain packaging last week, without putting a timetable on it. Ministers are convinced that the ban is necessary to take the next step to reduce smoking in the UK.

"We are going to follow what they have done in Australia. The evidence suggests it is going to deter young smokers. There is going to be legislation," said a senior Whitehall source said.

The move comes after a Lancet study of 19 countries found the UK falling down the health wellbeing league table. It found Britain's pace of decline in premature mortality has fallen well behind the average of 14 other members of the European Union as well as Australia, Canada, Norway, and the United States over the past 20 years. A key reason was the durability of a range of public health issues, including diet, drink and drugs.

Smoking causes over 100,000 deaths every year in the UK and the Policy Exchange thinktank has estimated it costs society £14bn. Despite a massive reduction in the numbers smoking since the 1950s, it is still estimated that one in five British people smokes. There is already a complete ban on cigarette advertising, and in one of the Labour government's most controversial moves, smoking in public places was also banned. The 2009 Health Act ended open display of tobacco products, mainly in supermarkets, from April last year and will come into force for all other shops from April 2015.

Ministers are also looking to see if the troubled families unit headed by the families tsar, Louise Casey, can start to design interventions to improve the diets of some of the 120,000 families it is already seeking to help.

Research shows that poorer families are far more prone to obesity, and immune to public health messages. In schools research is showing that it is wealthier families that are taking up healthy food options.

The Department of Health started a consultation in March 2011 on plain packaging which ended last August last year. Research for the department by the University of Stirling found that "plain pack colours have negative connotations, weaken attachment to brands, project a less desirable smoker identity, and expose the reality of smoking".

The study also found that non-smokers tended to find plain packaging less appealing than did smokers, and younger respondents tended to find it less appealing than did older respondents. Around two thirds of smokers say they started smoking before they were 18.

Since December in Australia cigarettes must be sold in uniform drab olive-green packets with graphic health warnings. The only marker of difference between products is the brand name written on the packet in a uniform style. New Zealand has promised to follow the Australian lead.

The Australian attorney-general, Mark Dreyfus, has defended the packaging saying "it is anti-cancer, not anti-trade". There has been some evidence that smokers are now trying to cover up the packaging with plasters.

• This article was amended on 7 March 2013. The original referred to "14 other original members of the European Union" (apart from the UK) in the Lancet-published study. The study itself referred to "the original 15 members of the European Union", by which it meant the 12 members of the EU when it was established in 1993 plus Austria, Finland and Sweden, which joined in 1995.