Consumer confidence has suffered a steep decline after the government cut winter fuel allowancesand warned of “painful” tax increases.

The GfK consumer confidence index, which has been running since the 1970s, has fallen to minus 20 this month as consumers reported feeling less positive about their personal finances and the health of the economy generally.

The index had shown a reading of minus 13 in August, and GfK said that the “big fall” for September reflected nervousness about the autumn budget.

Neil Bellamy, consumer insights director at GfK, said the decline in consumer confidence was “not encouraging news for the UK’s new government”. The index showed the outlook for personal finances fell from minus 7 to minus 9, while respondents’ views of the general economic climate deteriorated from minus 35 to minus 37.

Sir Keir Starmer raised the prospect of tax rises when he said that the state of the nation’s finances was “worse than we ever imagined” and that “those with the broadest shoulders should bear the heavier burden”.

The prime minister’s comments have prompted speculation of an increase to capital gains tax in the budget on October 30. The City has also been speculating that the government may abolish the inheritance tax exemption for shares listed on London’s junior stock market. The Aim market has declined by 4 per cent since the Labour Party took office on July 5, while the FTSE 100 index has been making gains.

Meanwhile, the government has decided to start means-testing winter fuel payments in a move that will deny handouts for millions of pensioners. Ministers said the changes were required to address a £22 billion hole in the budget.

Bellamy added: “Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers’ willingness to spend. Following the withdrawal of the winter fuel payments, and clear warnings of further decisions to come on tax, spending and welfare, consumers are nervously awaiting the budget decisions.”