Downbeat Britain as families brace themselves for slump in lifestyles

One in three people expects their standard of living to fall over the next three years as incomes and savings decline, a report out today claims.

Just a seventh of Britons believe their living standards have improved since the credit crunch began in 2007, according to research by Scottish Provident. It comes as a separate study shows that eight in ten Scots think the government is failing to disclose the full extent of the spending cuts it intends to make.

The figures emerge just days after Mervyn King, governor of the Bank of England, warned of a squeeze on living standards.He said the UK faced the most prolonged fall in living standards for more than 80 years as wages fail to keep pace with inflation.

But a report by Scottish Provident reveals that many people are already braced for a dip in their quality of life. The Edinburgh-based insurer found that 36 per cent of Britons expect their standard of living to decline either slightly or greatly by 2013, while just 24 per cent think it will improve.

People aged over 55 and either approaching or already in retirement are the most pessimistic, with almost half expecting their standard of living to get worse over the next three years.

Two thirds of adults surveyed identified their savings as the key to a good quality of life, although younger age groups were likely to rate having broadband at home as most important.

Owning your own home and car, taking at least one overseas holiday a year and eating out at least twice a month were also viewed as important factors determining quality of life.

Susan Barclay, head of marketing at Scottish Provident, said: "The last few years have hit many Britons hard, and our figures have underlined how people are generally not showing much optimism ahead of the start of 2013, as the austerity measures proposed by the coalition government begin to take effect.

"Given these concerns, it has never been more critical for individuals to ensure they have built up an adequate financial safety net to try and combat any unexpected decline in their living standards."

Fears of a decline in living standards are exacerbated by growing anxiety among Scots regarding the government's spending cuts, according to a survey by discountvouchers.co.uk, a money saving website.

It found that almost 90 per cent of people in Scotland are worried about the impact of the government's austerity regime.

Eight in 10 think they are not being told the truth about the extent of the cuts planned.

Half of Scots think the cuts threaten their job security and 80 per cent expect to be up to 300 a month worse off as a result of the measures.Just one in ten expects to be unaffected.

More than half think the cuts will damage the UK economy and 45 per cent believe they are not necessary.

Asked where the biggest cuts should be made, 68 per cent of people singled out the benefits system, 41 per cent local councils and a fifth the armed forces.

Simon Terry, director of discountvouchers.co.uk, said: "There is real concern about the scale of cuts. We are already seeing councils slashing their numbers by thousands, and the knock-on effect, together with rising inflation, is creating a lot of fear and insecurity.

"It's the uncertainty of the cuts and the impact they're going to have that is creating real concern among so many people."