Rayner said: “That whole generation at the moment feels, no matter how much you run on the treadmill, you are not going to make it.”

She said that the psychological impact of feeling that homeownership is out of reach and being in permanent debt makes people feel “that they are pushed down, punched down” and is “holding the nation back”

“They are in this trap of poverty, a system that feels rigged against them and they feel that nothing changes for them,” Rayner added.

“That’s why I’m always trying to fight for them because I believe politics does change people’s lives. It changed my life. It doesn’t happen overnight, but it does make a difference.

“But actually being part of that delivery of change, I think will make a huge difference. It will make a difference to the confidence of the economy. It will make a difference to the psychology of the nation.”

Her comments will be interpreted as another challenge to the Prime Minister over the direction of his government ahead of what are expected to be devastating local election results when millions vote in England, and for devolved governments in Scotland and Wales, next Thursday.

Labour is braced to lose thousands of seats, and there is speculation that Sir Keir Starmer – if he survives as Prime Minister – will need to launch a cabinet reshuffle in order to shore up his position.

Rayner, who commands strong support among the soft left of the party and its MPs, has publicly backed the Prime Minister at several crucial points since her resignation, and is expected to shortly be free for a return to Cabinet when HMRC concludes its investigation into her tax affairs.

She is understood to be undecided about a return to cabinet, regarding the direction of the government an important factor in her decision. Rayner may also launch a leadership challenge if it becomes clear that Starmer cannot survive.

In March, Rayner ignited leadership speculation by claiming in a speech that the government was “running out of time”.

She said then: “The very survival of the Labour Party is at stake – as a party and a movement we cannot hide, we cannot go through the motions in the face of decline. We are running out of time.”

Rayner’s comments on young people are part of the new Rest Is Politics podcast series about the struggles faced by Gen Z in Britain today.

The former housing secretary was forced to resign over tax affairs relating to stamp duty last September, but it is understood Starmer wants to find a way to bring Rayner back into his Cabinet as speculation grows of a potential leadership challenge.

Rayner said during her time in the Cabinet she been able to push through legislation which, she says, was aimed at supporting young adults: the Renters’ Rights Act, the Employment Rights Act and the forthcoming Leasehold and Commonhold Bill. She also championed giving 16-year-olds the right to vote.

“I want young people to look at the things that I was doing in government and say, she’s fighting for me and she gets it because they know things are difficult,” Rayner added.

In the interview, part of the four-part series called The Gen Z Story, Rayner spoke about the risks of politicians ignoring young adults who are currently locked out of homeownership, repaying hefty student loans and dealing with a job market where there are fewer opportunities for young people.

It comes as the cost of the average home has risen to more than eight times the annual salary, while the average graduate now faces debts of around £50,000 after leaving university.

Rayner, who is the mother of Gen Z children as well as a grandmother, said she had to be a guarantor for her 29-year-old son’s tenancy so he could afford to rent a home for his young family.

She said: “He’s got no opportunity at the moment to buy a property. He works really long hours. He provides for his family. He’s on a very low income. It’s really difficult for him.

“He had a problem with his teeth. He had to ask me to borrow to get his teeth done. He was in a hell of a lot of pain. He’s trying to work. He’s trying to raise his family. He can’t even afford a dentist.”

Rayner has previously tried to avoid sharing private details about her family, but took the unusual step of providing an insight into her life as a mother and grandmother.

She said: “It’s the psychology of my son having to come to me when he’s working, when he’s an absolutely brilliant dad, he’s looking after his family, but the psychology of him having to come to his mum or ask somebody else for help, that’s not a system that we should be enduring at the moment.

“That is not a system that Gen Z should have to accept because I think that [it has] a long drag on the economy, I think [it has] a long drag on our wellbeing as a country.”

Since resigning, Rayner has made relatively few public comments. She said she had chosen to speak about Gen Z because: “They [Gen Z] are our future. I’ve got skin in the game; I’ve got three of them at home. They need to feel that politics is for them. I go round schools and colleges all the time – the frustration for me is, they feel that no matter how hard they try, they can’t change the system.”

• The first episode of the four-part series, The Gen Z Story, is introduced by Alastair Campbell and presented by The i Paper’s Housing and Society Correspondent, Vicky Spratt. It will be available on The Rest Is Politics feed on Friday, 1 May. The episode featuring Angela Rayner will be released later in the series.