Politicians have failed to prepare the public for the scale of the impending squeeze on living standards, Business Secretary Vince Cable has admitted.
Mr Cable said that people still did not realise just how hard Britain's economy had been hit in the wake of the 2008 financial collapse.
In an interview with The Guardian, he said that the public needed to understand just how "painful" the coming period would be as the Government grappled with the UK's record budget deficit.
"I think it is not understood that the British economy has declined by 6 or 7 per cent - it is now 10 per cent below trend," he said.
"We are actually a poorer country, mainly because of the banking crash, the recession that followed it, and partly due to the squeeze we are under due to the changing balance of the world economy. Britain is no longer one of the world's price setters.
"It is painful. It is a challenge to us in government to explain all that, and it is a pity that the political class is not preparing the public for it to understand how massive the problem is."
Mr Cable laid much of the blame with Labour leader Ed Miliband and shadow chancellor Ed Balls, accusing them of failing to face up to the problems left by the former government.
"They are in a state of denial that there is a big structural problem with the UK economy," he said.
"There is a genuine debate we should be having about how radical the reforms of the financial sector should be - but there is not from the progressive wing of politics a sustained critique or pressure and argument.
"Ultimately it comes back to this defensiveness and an unwillingness to accept that Britain was operating a model that failed."