Shadow chancellor Ed Balls has set out a stimulus package that would see VAT slashed to 5% for home improvements and extend the bankers bonus tax to pay for 25,000 affordable homes.
He also called on the government to bring forward genuine long-term investment projects covering schools and transport.
Balls told the Labour Party conference that the time had come to adopt a Plan B because Plan A was clearly not working.
"Trying to cut the deficit too far, too fast isn't working. Unemployment is rising and the economy is flatlining.
"The government must adopt a steadier, more balanced plan to get our deficit down and take immediate action now to support the economy and create jobs here in Britain," urged Balls.
He said there were five immediate steps the government could and should take right now.
"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.
He said: "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 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% 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."
He added: "Even the IMF now says: "growth is necessary for fiscal credibility, and...slamming on the brakes too quickly will hurt the recovery and worsen job prospects."
"The world must learn the lessons of the 30s. There is no credibility piling austerity on austerity, tax rise on tax rise, cut upon cut in the eventual hope that it will work when the evidence is pointing the other way."
"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.
Mike Leonard, Director, Modern Masonry Alliance said "We are delighted that Ed Balls has endorsed our Plan B launched in September 2010.
"Our predictions of a year ago are now reality. This is not the time to play politics. We need all three parties to deal with the growing economic crisis and work together to urgently put in place the measures to Get Britain Building.
"Investment in construction stays in the UK, returning strong economic growth, ensuring our manufacturing capacity and creating jobs for the 2.5 million unemployed."
