Labour plans to expand the role of the Bank of England to target productivity growth in a bid to boost the UK economy.
The proposed change would be the most radical shake-up of the central bank’s remit since it became independent in 1997.
In a report published on Wednesday, Labour will set out a range of measures designed to spur investment and stop the UK economy “falling behind” those of other advanced nations.
The report will say that productivity - or output per hour worked - has grown particularly slowly in the UK because the financial system has channelled billions of pounds into property speculation and not enough into new technologies in manufacturing, ICT and other critical sectors.
If Labour wins the next election the BoE and the government would sign an accord laying out how they would meet a new 3 per cent annual productivity growth target.
After each Budget, Threadneedle Street would be required to report on the government’s plans in light of the target.
Currently, the BoE's primary target is to keep inflation to 2 per cent and Governor Mark Carney must write a letter to the Chancellor if it rises above 3 per cent.
The proposals come as all parties attempt to solve what's become known as the "productivity puzzle".
While the UK economy has delivered high employment levels in recent years, productivity has grown at just 0.2 per cent a year over the last decade, far slower than the average of 2 per cent seen before the financial crisis and well behind the rate currently achieved by other advanced economies. Low productivity growth has been a major factor leading to stagnating wages in that period.
Under the new plans to be announced by Shadow Chancellor John McDonnell, the BoE’s policy toolkit would be expanded to include “credit guidance and greater use of macroprudential policy, alongside existing monetary policy”.
Mr McDonnell will say that Tory economic policy is to blame for the slowest decade of productivity growth since the Napoleonic Wars, alongside wages that are lower in real terms than they were when the Coalition government came to power in 2010.
“We need [a financial system] that helps to deliver enough investment in the high-technology industries and firms so that we can reboot and rebuild Britain," Mr McDonnell will say.
“Under the Tories, we’ve seen more and more investment flowing into property speculation whilst high-tech firms have been starved of the money they need, and research spending has lagged far behind.
Other proposals in the report include the establishment of a Strategic Investment Board, setting up a Bank of England office in Birmingham and using publicly-owned RBS to deliver lending to small businesses.
It remains to be seen how BoE policymakers will react to the plans. Mark Carney has previously warned that a central bank’s role is to deliver price stability not "lasting prosperity".
However, other central banks are targeted on measures other than inflation. The US Federal Reserve and the Reserve Bank of Australia, for example, both have increased employment as part of their respective remits.
The report's author, Graham Turner, chief economist at GFC Economics, will say: “There are deep-seated structural problems in the UK economy. Recent poor economic data underlines the scale of the difficulties. The UK is ill-prepared to face the challenges of life outside the European Union.
"Without major changes to economic policy, the UK will be marginalised, left behind by countries with higher levels of investment in technology."
