A tax on bankers' bonuses, capital investment and a temporary cut in VAT is the way to lift the UK out of recession, according to Labour leader Ed Miliband.
The 0.7% drop in GDP is evidence that "the Government's economic plan has failed", Mr Miliband said.
He suggested: "Tax the bankers' bonuses to put our young people back to work. A temporary cut in VAT would put more money in people's pockets and get the economy moving. Advance our infrastructure projects in the capital building programme of schools and elsewhere that will help the construction sector.
"Today's the day that we see that this Government's economic plan has failed. They promised change. They promised people that the pain they were inflicting would put the economy back on track. But month on month, year on year we see things getting worse and not better. And it's families and businesses that are paying the price of lost jobs and in struggling to get by.
"How much worse to things have to get before this Government changes course?"
The drop in GDP is largely driven by the poor performance of the construction sector which itself shrank by 5.2%.
Mr Miliband said: "The construction sector relies on public sector contracts. This Government wants to say that we have got public economy and the private economy. Actually we have one economy where we rely on each other.
"I'm afraid the Government has got to learn the lessons from this. It's no good them doing what they normally do which is blame everybody else or simply try to say the pain is worth it."
Mr Miliband made the comments during a visit to a former NHS nursery in Edinburgh that was taken over by a workers' co-operative when the health budget was cut.
Initiatives like the Morningside Children's Nursery are an example of the change he would like to bring about as Labour leader, he insisted.
"This shows what parent power can do. It shows the kind of Labour party that I want to build, in Scotland and across the UK. Parents here got together with the staff and said: we don't want this nursery to close; we want to save this nursery.
"That's what they've managed to do with their own initiative, support and working together.
"National politicians have to keep their promises and do the right things for the country, but they also have to rebuild faith in politics locally and that's what the renewed Labour party that I'm campaigning for, that I am leading, is all about.
"That's why we call it real change, built on the ground, built in local communities. I think it can be very radical. In a way I think it's getting to the roots of political parties, or at least the roots of the Labour party, which is about a party rooted in the community."
Morningside Children's Nursery director Lea Dryburgh said Mr Miliband's support for initiatives like the nursery is a vote winner.
"If he keeps trying to sort out education and nurseries he will get a lot of people on his side, especially working parents. Childcare is a good start for him."