Almost two-thirds of people believe the current generation of children will have a lower standard of living than their parents, as concern about the economic crisis hardens into long-term pessimism, a new poll shows.

The Ipsos Mori survey for the Observer suggests that the traditional postwar assumption that living standards always tend to rise in the medium to long term is being eroded as austerity bites and real incomes stagnate or even fall. The study, conducted before chancellor George Osborne's grim autumn statement on Tuesday, represents a marked turnaround since 2003, when those who were optimistic about the next generation's prospects outnumbered the pessimists by almost four to one.

Some 64% of those questioned believed it was unlikely that today's youth would have a better life than their parents, while just 32% thought it was likely. When asked whether their children would have a higher or lower quality of life when they reached their age, just 23% said they believed it would be higher, while 35% said it would be lower, with 32% saying it would be about the same.

This represents a big change since April 2003, when 43% believed their children would be better off at the same stage of life and just 12% thought they would be worse off.

The findings suggest the British public was drastically readjusting its expectations even before Osborne slashed growth forecasts and made a string of gloomier estimates on unemployment and borrowing in his autumn statement last Tuesday.

The poll comes as leaders prepare for another critical summit this week on the future of the euro, with fears rising that the 17-nation currency zone could break up, with devastating effects for the global economy. It also shows that pessimism about the next generation is now even greater in the UK than in the US. Earlier this year 44% of Americans thought it was likely that young people would enjoy a better life than their parents. This was down from 71% at the end of 2001.

David Miliband, the former foreign secretary, spells out a personal manifesto for putting the country back on track that would involve stimulating investment by enlisting the power of both the public and private sectors. Writing in the Observer, Miliband says: "The central economic issue is how to stimulate productive investment when public finances are constrained. I focus on three economic priorities. The need for financial reform, for example through a British Investment Bank. The need to promote better workplaces that engage employees… And the need to use public sector power… as a coherent driver of the private sector investment equation."

Miliband, who is still seen by some in the Labour Party as a future leader if his brother fails to make the party electable, says the party needs to "re-engage on social policy – not just the structural questions of inequality but cultural questions of responsibility, to self, to family, to community".

The polls shows pessimism has fed through to views about Britain as a whole. About 61% now say that Britain is getting worse as a place to live, up from 49% in June 2010, while only 6% say it is getting better.

• The Conservatives have edged ahead of the opposition, with support from 38% of voters, up two points from last month, with Labour down two points on 36% and the Liberal Democrats unchanged on 14%, according to an ICM poll for the Sunday Telegraph..