Balls told the Labour Party conference yesterday that the time had come to adopt a Plan B because Plan A had failed.
He said the government must bring forward genuine long-term investment projects covering schools and transport.
He set out a five-point spending plan that he said was needed to stimulate growth as the economy continued to stagnate.
“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.
But the Treasury hit back warning that plans to cut VAT would cost £2.2bn, four times more than Labour estimated.
Overall Balls’ plan to kick-start the economy has been costed at something like £21bn.
Balls five step plan
“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.”
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