A Labour government should make the UK the world’s first country to make policy based on its impact on wellbeing as well as the economy, one of the world’s leading experts on the economics of happiness has said. With Keir Starmer in No 10, Downing Street should require Whitehall departments to appraise the potential impact on citizens’ wellbeing when they make funding bids, Richard Layard said. The next chancellor should announce measures of happiness and misery alongside GDP in their annual budget statements, he added. The call comes as it emerged a research agency set up under David Cameron to help to make people happier is to close at the end of April. The What Works Centre for Wellbeing, credited with influencing policies such as levelling up, will shut amid Whitehall funding cuts, in a move Layard described as a “shocking and untimely loss”. Data from the Office for National Statistics (ONS) shows happiness in the UK – which rebounded after the worst of the Covid-19 pandemic – dipped again this year. The measure is now at the lowest non-pandemic level since 2015. Lord Layard, an eminent economist who advised the governments of Tony Blair and Gordon Brown, said the approach could be embedded by the end of Labour’s first term and would result in policies – from the introduction of low-traffic neighbourhoods to the setting of the national retirement age – being judged on which give the most increase in wellbeing per unit of net cost. Countries including New Zealand, Canada and Finland have committed to being “wellbeing governments”, but Layard said the UK could be the first to significantly act on it. The Labour peer’s call is backed by the Nobel prize-winning economist Prof Christopher Pissarides. But the idea is also facing opposition, with the Centre for Policy Studies (CPS), a right-leaning thinktank, warning that “policymakers need to stop being sidetracked by fashionable metrics which … are likely to impose yet more regulatory burdens inimical to growth.” Karl Williams, the CPS research director, said that “economic growth is, without a doubt, the most effective and direct route to improving people’s lives, but many in Britain have lost sight of this”. In his 2020 party leadership run, Starmer said it was key to “treat wellbeing equally to economic growth” and he told the 2021 Labour conference that “with every pound spent on your behalf, we would expect the Treasury to weigh not just its effect on national income, but also its effects on wellbeing”. But the Labour leader’s speech on the economy at the Resolution Foundation in early December included 29 mentions of growth and none of wellbeing or happiness. However, Layard said that after years of research on the economics of wellbeing, including the ONS collection of wellbeing data since 2012, the time is right to finally bring in the new approach. “Money spent on things like making the courts work, making child protection work, good early intervention, health and social care, especially mental health, has a higher [wellbeing] benefit cost ratio compared to infrastructure,” he said. “There is a feeling in the country that things are just not working and it’s true actually.” Layard wants the Treasury to establish a wellbeing analysis group that can train Whitehall analysts to apply for funding while accounting for wellbeing. Treasury officials should also be trained to scrutinise the wellbeing elements of bids and decide whether they are plausible or not. Pissarides said: “Wellbeing should obviously be the goal of government, and now we have the tools to make it an operational objective.” Layard is producing a report before July that will provide at least one example of how policy can be measured for wellbeing effect in each government department, “so they can’t say we can’t do this”. There will also be a 500-page manual. The most common approach is to translate measures of wellbeing into a monetary value, but some economists believe that wellbeing effects cannot credibly be monetised. This means the wellbeing effects of policies would have to be described, quantified where possible and communicated, according to a recent Treasury discussion paper on measuring the effects of policies on life satisfaction. Layard said the current government had done “not much” to advance the agenda. He added the Treasury manual for appraising policies had included guidance on using wellbeing evidence since July 2021: “This was an amazing intellectual achievement but in fact not very much has happened, which is a combination of a lack of interest on the part of ministers and a lack of training on the part of civil servants in how to do it.” Labour did not respond to a request for comment.