Shadow Chancellor Ed Balls has called on the Government to end the "deep unfairness" of planned changes to tax credits for low-income families as it was reported that the Chancellor is poised to water down proposals to strip higher earners of child benefit.
Mr Balls said if the Government could change its plans on child benefit - reported in The Daily Telegraph - then it should do so over measures coming into force in April which he said would cost working parents thousands of pounds a year.
"What happened on child benefit was really unfair, to hit families in that particular way so badly," Mr Balls told ITV's Daybreak.
"But on tax credits, what he is doing, for families on £17,000, he is saying unless you can work a lot more hours, we will take away £3,000 - it actually makes it better off to be out of work, that is really, really perverse. That is partly why unemployment is going up and he is not getting the deficit down."
He added: "Stop this deep unfairness for low-income families. If they can move on child benefit for families on £40,000, they should move on tax credits for families on half those incomes."
Mr Balls' remarks come after the Daily Telegraph said Mr Osborne is poised to row back on plans to strip high earners of child benefit. From January 2013, parents earning more than £42,745 a year - the 40% tax rate threshold - are set to lose their payments.
But the move has proved unpopular, sparking claims that lone parents and single-earner families are being penalised. A mother and father earning £40,000 each would keep their payments while a single parent on £43,000 would lose out.
Treasury officials are now looking at raising the eligibility cut-off point amid fears of a backlash from middle-class voters, according to The Daily Telegraph. Under one idea being examined, it was reported, the cap threshold would be increased from £42,745 to £50,000 to allow more families on middle incomes to keep the benefit.
"The Government has been clear that it is fair to ask those who are better off in our society to make a contribution to paying down the debts that we have built up over the last decade in Britain," aides said.
"It is not fair to ask someone earning £20,000 to pay for the child benefit that goes to someone earning £80,000 or £100,000. We will set out details of how we will implement this in the coming months."