In yesterday’s Budget the Chancellor revealed dramatically reduced forecasts for UK growth and productivity. The Resolution Foundation says the squeeze on incomes could last longer than that which followed the post-2008 crash with real disposable incomes set to fall for 19 successive quarters.

Author, Torsten Bell, said: “The future for family finances implied by yesterday’s forecasts is unremittingly grim. Lower productivity feeds through directly to pay, which is now forecast to be £1,000 a year lower on average than the OBR thought back in March. We project that this would mean average pay not recovering to its pre-crisis peak until 2025 – 17 years after the pay squeeze began.

“The pay downgrade feeds through into weak projections for family incomes. Disposable income per person is now set to be £540 lower by 2022 than previously expected, with the current fall in real incomes set to continue and to become the longest on record.”

At the same time, the Lloyds Bank Spending Report, conducted by Ipsos MORI found that those who felt positive about their personal finances in October dropped by 3%, from 64% to 61%. There is a big gap between different age groups, with 78% of over 65s feeling positive about their personal financial situation, versus just 60% of 18 to 24-year-olds. Also, households with children aged under 18 are far less likely to report their situation as comfortable (54%) than those with no children (63%).

Supporting the wider view of declining real incomes, Lloyds Bank data showed people continued to spend more on essentials, which represents year-on-year growth of 2%. This was the 17th consecutive month of year-on-year growth in essential spending. Food, which accounts for around 40% of the essential spend, saw a year-on-year rise of around 2%, the seventh consecutive month of growth. The recent official inflation figures showed food and drink rising at 4.1%.

Fuel spend rose by around 5%, a 14th consecutive month of year-on-year growth, while gas and electricity spend rose to around 2.5%, from around 1% last month

Robin Bulloch, managing director of Lloyds Bank, said: “While most people remain positive about their personal finances, last month saw a significant drop off in consumer confidence. Inflation is now at a five-year high and it appears that millennials are feeling the pinch more than most. Therefore it was no surprise to see the government reaching out to the younger generation in this week’s Budget.

“But regardless of age, as we approach the festive season, our advice to households is manage your finances carefully. With the cost of essentials continuing to rise, avoid spending more than you can afford to on luxury items, and don’t start the New Year with a financial hangover.”