Tony Blair must do more to tackle obesity, traffic and other threats to the quality of people's lives, official advisers have urged.
Britons spend longer commuting than anyone else in Europe
The UK government is focusing narrowly on economic growth, while neglecting vital everyday issues, says a Sustainable Development Commission (SDC) review.
Its authors recommend higher taxes to promote healthier lifestyles.
A spokesman for the Department for Environment, Food and Rural Affairs (Defra) agreed they "could do more".
He said: "Some of it makes uncomfortable reading but we need to read that - to see the uncomfortable reality - in order to move forward and take decisions that otherwise would not be made."
The chairman of the commission, Sir Jonathon Porritt, said the government must fight the "delusion" that economic wealth necessarily made people happier.
Entitled Shows Promise: But Must Try Harder, the report says Britain is "adrift" from meeting its global and national responsibilities to the environment.
The SDC blames the likely failure of the UK to meet its target for carbon emissions by 2010 on the government's "disappointing" efforts on climate change.
Waste management in the UK was branded "dreadful" - the commission's harshest mark in the five-year review - with recycling rates among the lowest in Europe.
Traffic congestion was also "dreadful", with Britons spending more time commuting than any of their European counterparts.
The report also criticised health policy, noting that life expectancy of those on lower incomes was not rising and that more Britons than ever are obese.
The authors complained that ministers did not make a connection between public health and sustainable development when drawing up policy.
But the report found that significant strides had been made in some areas, including the quality of water and air.
Air quality was rated as "good", after improving in most areas in the last five years.
Sir Jonathon, a former director of Friends of the Earth, believes the prime minister must risk unpopular moves such as increasing taxes on air fares and other services to reflect their environmental cost.
He told the BBC: "It isn't a God-given right to fly anywhere at any time on the planet at the lowest possible cost. It is a privilege and it is a privilege for the rich world."
"The problem of climate change is now as important to the world as international terrorism.
"What I see is a continuing uncertainty about how to deal with this politically and an unwillingness to take some of the risks that must now be taken."
The SDC was set up by the government to monitor its progress in achieving greater wealth without creating new threats to communities and the environment.