British politicians need to "work on the quality of education and welfare" rather than blaming immigrants for the country's woes, a senior Brussels official urged.
Viviane Reding renewed her criticism of the "distorted" debate about the UK's future in the European Union, claiming it was distracting from vital reforms and damaging economies.
The European Commission vice-president suggested that Prime Minister David Cameron's arguments for keeping Scotland within the United Kingdom applied equally to remaining within the EU.
And the focus should be on agreeing new rules with the eurozone countries - which she hopes will form a "United States of Europe" - rather than "opt-outs, renegotiation and referenda".
Mr Cameron has promised an in/out referendum on a new-look relationship between Britain and the EU by 2017 if the Conservatives win the 2015 general election.
Ms Reding - who has been a vocal critic of his efforts to rein in "free movement" rules in a bid to curb large-scale immigration to the UK - kept up her opposition in a speech at the University of Cambridge.
"You would think that a country as traditionally open to the world as the UK would embrace this fundamental freedom wholeheartedly. And for a long time it did," she said.
"Now something has changed. Openness is no longer seen as opportunity, but as a threat. Across political parties, there is talk of curbing immigration, of closing doors.
"I have made my position clear: the four freedoms enshrined in the EU Treaties come as a package.
"You either enjoy all of them - or none. Those who benefit from the free flow of capital, goods and services must also accept that our citizens are free to move in the EU to travel, study and work.
"And the rules allow Member States to fight abuse of this right."
She continued: "Politicians also need to work on the quality of education and welfare, so that people in this country can find employment and enjoy reasonable social standards.
"Simply trying to project all problems on the supposed issue of too many foreigners moving into the country is certainly not the answer.
"It is not EU policies that are causing problems in this area. But somehow this misconception prevails, and there is a sense that all difficulties could be solved if the UK could get out of them, that it needs to free itself of supposedly 'alien', harmful rules and principles that are imposed on it."
Eurosceptic arguments that the UK would be "leaner and meaner" outside of the EU ignored the fact that it would face huge problems negotiating favourable deals to access the single market, she said.
Drawing a parallel with the argument between Westminster and Edinburgh over the Scottish independence referendum, she said Britain would simply not have sufficient "clout".
"I would like to echo the words of Prime Minister Cameron, who very recently said the following with regards to the Scottish referendum on independence: 'The plain fact is we matter more in the world together'," she said.
"Well, the same is true in the case of the EU."
The UK appeared to be "gradually, inexorably drifting away" from Europe when it should be leading efforts to secure agreements within the Union with countries using the single currency, she said.
"The debate in this country about the UK's place in the EU is distorted. All that talk about opt-outs, renegotiations and referenda distracts from the real issue.
"Finding more solutions like the ones I have described is what we should all be focusing our energy and creativity on.
"Unfortunately, the debate is distracting from the real challenge in the relationship between the UK and the EU. And it is even inflicting wider damage by holding back our Union as a whole.
"We don't need this. What we need are great ideas and solid arguments about how we can strengthen the EU and make it more competitive on the world stage.
"The UK could make a real difference here, and this is one of the reasons why I would argue that the EU is stronger with the UK in it. Indeed, it is one of the reasons why I want it to stay in - and why I also want to say to you: if this country decides one day to be part of a stronger integration, you know where to find us. The door is open, and there is a seat at the table for you.
"We need to replace the current debate which leads to uncertainty for business and holds-off investment with constructive proposals that bring about certainty, investment and progress. This would be beneficial for both the UK and the EU."
Claiming that the present debate was at odds with a British tradition of informed pragmatism, she said: "As soon as the issue of the United Kingdom's relationship with the European Union is raised, a strange reflex seems to kick in, pushing the public debate away from the facts.
"The British can still do what comes naturally to them and debate their way out of this.
"They have every right, and even a duty, to be critical, to scrutinise and to question. But whatever they do, I just hope they do it in true British style."
A Foreign Office source said: "This is a mixed bag of a lecture from an unrepentant federalist.
"While Commissioner Reding recognises the needs of euro-outs and the global race, there's no understanding that the EU's deep flaws need putting right, for example, leaving more issues to national governments and the lack of democratic accountability.
"Nothing's more damaging to the EU than failing to accept that it needs to deal with problems like free movement abuse.
"Only a tiny minority across Europe back her call for a United States of Europe but she's entitled to her view, however, few share it. The Prime Minister, however, is confronting those problems by seeking to make the EU work better for all and giving the British people a choice on the EU: in or out."
Ms Reding pointed to the impact on the UK's financial services sector as a key factor in the damage that exit from the EU could inflict on the country.
"The City would most definitely lose its unhindered access to the single market," she said, "because EU member states would obviously have no interest in supporting what would then be an offshore financial centre competing with their own financial firms.
"And companies from third countries would find London a much less attractive location to do business, since it would no longer be a gateway to the EU's single market."
She went on: "In 2012, the City's trade surplus with the EU was £16.6 billion - more than a third of the UK's total finance sector surplus.
"This trade in financial services is extremely valuable for the British economy. And it is in the UK's interest to have a say on the rules that govern these transactions.
"If the UK were to leave the EU, however, it would no longer be able to influence EU regulation. It would have to live with the rules decided on by the EU countries - and these countries, some of them with little or no financial services industry of their own, have very little incentive to take the City's needs into account."
Renewing her stated desire that "the eurozone should become the United States of Europe", she said she accepted that the UK would not be a part of that.
"Like Winston Churchill, I believe that the UK will not be part of this, but it should remain a close ally with the federated eurozone, with which it would continue to share a common market, a common trade policy and hopefully a common security agenda," he said.
But she accepted that those countries seeking closer integration based on their use of the single currency had also to be willing to take into account the needs of other member states.