Labour was warned today that it would hand the Conservatives an "easy win" at the next general election by jumping on the austerity bandwagon at "just the point it seems to be coming off the rails".

Compass, a centre-left think tank, claimed the party's new economic direction made it look like Labour had "wholly accepted" Chancellor George's Osborne's fiscal strategy.

In a report out today it suggests that voters have "scant reason" to believe a future Labour government would be any different from the last.

The party also has little to show for its 18 months of opposition in terms of publicly announced economic policy, it adds.

It follows an admission by shadow chancellor Ed Balls earlier this month that Labour accepted the Government's public sector pay freeze and could not promise to reverse Coalition spending cuts.

Unfortunately for Labour the strategy hasn't worked so far - polls taken in the week since Balls' apparent change in direction have shown Labour slipping, with one poll giving the Tories a five-point lead.

The report, White Flag Labour? Fiscal policy for the UK's next progressive Government, warns the party not to accept the "fallacies of Osbornomics", seizing on today's dismal official figures confirming the UK economy shrank by 0.2% in the last quarter of last year as proof the Government's plans are failing.

It states: "Ed Balls' new strategy of accepting Coalition spending cuts as a fait accompli risks making it look like Labour has wholly accepted George Osborne's fiscal strategy - demoralising Labour Party supporters who are fighting against them while allowing the Conservatives to dictate the terms of the economic debate."

The report claims it would be "no surprise" if the Chancellor announced in 2014 that his plan to eliminate the structural deficit was being pushed back to 2020.

Labour has a "clear duty" to the British public to highlight the "manifest flaws" of the Government's economic management, it adds.

Economist Howard Reed, author of the report, said: "Given the trouble that the Coalition's deficit reduction programme has run into, it would seem ludicrous for Labour to jump on board the austerity bandwagon at just the point it seems to be coming off the rails."