Shadow Chancellor Ed Balls will use a speech to the Labour Party conference on Monday to warn that the economy is facing its "darkest, most dangerous times".
He will argue that the economic recovery was stopped in its tracks by government spending cuts, and will say that action is needed to turn it around.
Balls will also announce that Labour would use money raised from the sell-off of publicly-owned shares in RBS and Lloyds banks to pay off party of the national debt.
“Our country, the whole of the world, is facing a threat that most of us have only ever read about in the history books," Balls will say.
"A lost decade of economic stagnation… Families and businesses fearful about the future, cutting back on spending and investment. Governments all around the world trying to cut spending at the same time. Demand sucked out of the economy. Stock markets tumbling, banks in trouble, economies stalling, unemployment rising - a vicious circle as slow growth makes it harder to get deficits down.
“Not a crisis of any one country or continent - but a spiralling global crisis - from which no economy can be safe - threatening the jobs, pensions and living standards of families here in Britain and across the world.
“This is not - as the Conservatives claim - simply a crisis of public debt which can be solved - country by country - by austerity, cuts and retrenchment – but truly a global growth crisis which is deepening and becoming more dangerous by the day.”
Balls is expected to concede that the Conservative-led government "didn't cause the global financial crisis", which began while his own party was still in power. But he will argue that the government may have made the situation worse.
“A year ago, I warned that, with our economy still fragile and a global hurricane brewing, it was not the time to tear out the foundations of the house. But David Cameron and George Osborne thought they knew better. They said a VAT rise and cutting faster than any other major country would boost economic confidence and growth; that if they cut public sector jobs, the private sector would more than fill the gap; that their plan would make Britain immune from the global storm - and any other course of action would cause stock market turmoil. And to be fair, some respected people agreed with them.
“But we in this party argued for a steadier, more balanced approach – halving the deficit over four years. We said that going too far, too fast would choke off the recovery and put jobs at risk; we warned that cutting spending and raising taxes too fast would create a vicious circle here in Britain and make it harder to get the deficit down.
“And look what’s happened - even before the global instability of the past three months. Confidence has slumped. Our economy has flat-lined now for nine months. Slower growth in Britain than any other G7 country except Japan. Unemployment now rising again. That is why the deficit is already set to be £46 billion higher than the government planned."
Any solution to the crisis must do more than cut the deficit, Balls will say. He will also encourage his party to present new rules and fiscal policies, to be monitored by the Office for Budget Responsibility, to ensure growth returns in the medium-to-long term.
Balls will also announce that Labour will use the windgall gain from selling off publicly-owned shares in RBS and Lloyds to pay down the national debt.
“It will not be enough to expose that David Cameron and George Osborne have got the economy badly wrong. We still know today what we recognised in 1994: we will never have credibility unless we have the discipline and the strength to take tough decisions.
“So let me say these two things today. First, before the next election - and based on the circumstances we face - we will set out for our manifesto tough fiscal rules that the next Labour government will have to stick to – to get out country's current budget back to balance and national debt on a downward path. And these fiscal rules will be independently monitored by the Office for Budget Responsibility.
“And second we know that, even as bank shares are falling again, David Cameron and Nick Clegg are still betting on a windfall gain from privatising RBS and Lloyds to pay for a pre-election giveaway. We could also pledge to spend that windfall. But - just as with the 3G mobile phone auction – we will commit instead in our manifesto to do the responsible thing and use any windfall gain from the sale of bank shares to repay the national debt. That will be Labour’s choice - fiscal responsibility in the national interest."