Shadow Chancellor Ed Balls has set out a five-point plan for economic recovery that includes tax cuts and bringing forward capital spending projects, while painting a very bleak picture of the UK economy in a speech to the Labour party conference in Liverpool.
Accusing the coalition government of "abdicating responsibility", Balls said that "piling on austerity on austerity" was "just not working".
He added that unless lessons were learned then the recession would turn into a depression, as it did in the 1930s.
"Tory Britain is no safe haven," Balls said. "For the millions of families struggling with higher bills, worried about their jobs and what their children’s future holds, Tory Britain is no safe haven at all."
Balls' five proposals would include:
- Reversing January's rise in VAT
- A cut in VAT to 5 per cent for home improvements
- A one-year National Insurance tax break for small firms who hire extra workers
- Another bank bonus tax
- Bringing forward investment projects including schools and roads.
"Call it Plan A, call it Plan B, call it Plan C, I don't care what they call it, Britain just needs a plan that works," Balls said.
While admitting that Labour "made mistakes" over banking regulation, the 10p tax rate and immigration, Balls said that the previous government had not caused the crisis.
"Our country - the whole of the world - is facing a threat that most of us have only ever read about in the history books – a lost decade of economic stagnation," Balls said.
"Not a crisis of any one country or continent - but a spiralling global crisis - from which no economy can be safe - threatening the jobs, pensions and living standards of families here in Britain and across the world.
"This is not - as the Conservatives claim - simply a crisis of public debt which can be solved - country by country - by austerity, cuts and retrenchment – but truly a global growth crisis which is deepening and becoming more dangerous by the day."
In setting out his five proposals, Balls said:
"Step one – repeat the bank bonus tax again this year – and use the money to build 25,000 affordable homes and guarantee a job for 100,000 young people - it can’t be right to be cutting taxes on the banks when almost 1 in 5 young people are now out of work.
"Step two - genuinely bring forward long-term investment projects – schools, roads and transport – to get people back to work and strengthen our economy for the future.
"Step three – reverse January’s damaging VAT rise now for a temporary period – a £450 boost for a family with two kids - immediate help for our high streets and for struggling families and pensioners too.
"Step four - announce an immediate one year cut in VAT to 5 per cent on home improvements, repairs and maintenance – to help homeowners and the many small businesses that are so dependent on the state of the housing market.
"Step five – a one year national insurance tax break for every small firm which takes on extra workers, using the money left over from the government’s failed national insurance rebate for new businesses – helping small businesses to grow and create jobs."
Balls also said that before the next election his party would set out "tough fiscal rules" that would be independently by the Office for Budget Responsibility.
He added that the windfall gained from selling-off publicly owned shares in RBS and Lloyds would be used to pay off the national debt.
"We will commit instead in our manifesto to do the responsible thing and use any windfall gain from the sale of bank shares to repay the national debt," Balls said.
The shadow chancellor said that backing his new reforms would be a rejection of "the debilitating ideology" that "private always good, public always bad".
"The same view that says government is always the problem, and getting government out of the way is the solution and that rewards at the top will eventually trickle down.
"It is the same ideology that says private companies running the health service will always be better for patients.
"That says cutting police officers, youth services and family intervention projects will somehow make our communities safer.
"That claims ‘we’re all in this together’… but then delivers Budgets that hit families with children, hit women more than men and hit people with disabilities hardest of all."