In his speech to the Conservative Party conference he said: “These are difficult times. We are being tested.

“I can’t tell you that all is well, but Britain is on the right track.”

His speech comes the day after the International Monetary Fund (IMF) said the UK economy would shrink 0.4% over the course of 2012.

Cameron told the conference: “Unless we act, unless we take difficult, painful decisions, unless we show determination and imagination, Britain may not be in the future what it has been in the past.

“Because the truth is, we’re in a global race today. And that means an hour of reckoning for countries like ours. Sink or swim. Do or decline.”

He also said the government’s move to reform public sector pensions would massively benefit the taxpayer.

“For years people said you’ll never reform public sector pensions, the trade unions won’t stand for it. Well, we’ve done it, and it’s going to cut the cost to the taxpayer almost in half.”