Hard-up families are being forced to run down their savings for the first time since the late 1950s to meet soaring living costs.

The squeeze on families’ pockets means that the amount saved by Britain as a whole has fallen as households collectively spent more than they earned. As a result, the official savings rate turned negative in the first quarter of the year — for the first time since 1958, when Harold Macmillan was Prime Minister.

The savings rate, the key official gauge of how much earners set aside, plunged to minus 1.1 per cent, from 1.8 per cent, in the final three months of last year. This blow came as families struggled with runaway increases in bills for food and fuel while their earnings failed to keep pace with inflation.

In the three months from January to March, yesterday’s official figures showed, the average Briton had income of £3,751, or £1,250 a month. Yet the average person spent £3,792, leaving a shortfall of £41 in the quarter, or about £13.66 each month, that they had to find from their savings. The result was the first negative savings rate for six decades.

Families’ personal finances have since barely recovered, with the savings rate rising just a fraction to a meagre 0.4 per cent in figures for the second quarter.

The average person saved a paltry £16 during the three months to the end of June. Average income was £3,826, or about £1,275 a month, with spending of £3,810 in the quarter, or £1,270 a month.

The growing toll on family budgets was emphasised as the figures indicated that, as well as curbing savings drastically, consumers have begun to rein in former high-spending habits.

Total spending by consumers nationwide dropped by 0.1 per cent, or £250 million, in the second quarter. It was the first outright drop in consumer spending since early 1995. Experts sounded warnings that spending was set to plummet further as households face more steep rises in living costs such as utilities bills, with only modest pay increases to ease the strain.

With economic growth stalled, a further retreat by fearful consumers will heighten the danger of a deep recession, economists said. That will add to pressure on the Bank of England to cut interest rates soon.

The threat of recession was emphasised by the weakness of increases in incomes in the second quarter, which rose by only 0.4 per cent. This was just a quarter of the rise in the previous three months, and the smallest quarterly increase since early 2002.

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