Tax relief cuts
Ed Miliband and Ed Balls are calling on George Osborne to target high earners in upcoming budget (Reuters)

Chancellor George Osborne has been accused of creating a £1.6bn tax cut for the wealthy, as the Labour Party outlined its expectations for his next budget.

Shadow chancellor Ed Balls made the claim as he called on the government to cut pension tax relief for those earning over £150,000 from the 50 percent rate to 26 percent.

He said the cut would generate a revenue of £1.25bn, which would give Osborne the funds to reverse previous cuts to working and child tax credits.

In a press conference to lay out Labour's expectations in preparation for Osborne's upcoming budget announcement, Balls and Labour leader Ed Miliband claimed David Cameron's coalition government had created an economy that is "not working for working people".

Miliband accused the government of ignoring the real priorities, such as unemployment figures at a 17-year high and a squeeze on low- and middle-income families.

"Does this look like a Conservative government that knows the answers? It certainly doesn't," he said.

According to Miliband, current government measures will end up costing the average family with children an extra £530 a year.

He said: "[The coalition] seems to be spending its time arguing about whether and how to cut the 50p tax rate. Something that the deputy prime minister, Nick Clegg, once said it would be outrageous to consider and now says it's something they can do."

Labour accused the coalition of making budget decisions that fail to affect high earners, while those on lower or average pay packets feel the pinch of frozen wages and rising prices. For many in these brackets, tax credit cuts mean it is more affordable to claim benefits than to work.

Miliband said that any move to reduce tax relief for high earners would "benefit families up and down the country".

Balls said that Labour's 50p tax rate was introduced alongside a tax relief cut to high earners' pension contributions to 20 percent, with a view to raise £4bn of revenue.

Osborne cut pension contributions in a different way, capping the annual amount to be paid in, which he claimed would see the same revenue, though Balls claims it only raised £2.4bn, falling £1.6bn short of projections.

He said that Osborne should roll back on that decision, cutting the pension tax relief to 26 percent.

"That is what we need for next week's budget. Not more tax rises on families, not more empty promises on jobs, not more of the same," he said.