Ahead of next week's budget, Labour leader Ed Miliband and the shadow chancellor Ed Balls set out how they would fund the financial hole left by reversing the VAT rise on petrol, now £6 a gallon and begin stimulating activity for the UK economy, putting forward plans that could create 115,000 jobs.
Their tests for next week's budget, they said, included whether the chancellor is taking steps to relieve the pinch on living standards, and whether the coalition has set out a clear plan for economic growth.
Labour's central proposal is that the government should repeat last year's bank bonus tax – which raised £3.5bn. Cautiously estimating the fresh tax could bring in £2bn, Ed Miliband and Ed Balls suggested:
• Establishing a £600m youth unemployment fund which they say would help more than 90,000 young people into work.
• Providing £1.2bn to fund the construction of 25,000 affordable homes which would also serve to shore up the "faltering" construction industry which, they said, had lost 27,000 jobs in the last year. These plans would generate 20,000 jobs, they claimed.
• Providing a funding stream for regional businesses by boosting regional growth fund by £200m.
Miliband said: "We are under no illusions that at this stage the government will abandon their deficit reduction plan – they are too dug in for that.
"But at least they should take some steps to deal with faltering growth in our economy, to start to establish a plan to create jobs in the private sector … to deal with the crisis of youth unemployment in our country and build the skills we need for the future.
"The tests for next week's budget are clear: growth and living standards. But the signs aren't good that they will be met. The government should think again."
Ed Balls, the shadow chancellor, maintained that a Labour government would still be sticking to the former chancellor Alistair Darling's plan to halve the deficit by the end of the current parliament.
He took on suggestions that Darling's plan would have meant just £2bn fewer cuts than Osborne's £16bn, saying these took no account of the fact that circumstances had changed since Darling produced his forecast, and that borrowing was £20bn lower than expected.
However, Ed Balls stopped short of saying how any extra cash would be used, only suggesting it would have insulated a Labour government from having to make the cuts the government is now making.
Ed Balls said it was "complete nonsense" to claim that a Labour government would have been cutting spending by almost as much as the coalition.