Labour has dropped its flagship policy of reintroducing a 50p income tax rate and instead is concentrating on stopping the Chancellor from cutting the 45p rate to 40p.

Ahead of next week's emergency Budget, George Osborne's Shadow, Chris Leslie, said in a speech in the City of London: "When it comes to the 50p rate, that issue is gone. The question is now whether the 45p rate is going to be reduced."

He stressed how the 45p rate was an important part of making sure there was fairness in the UK tax system.

"If you're going to see the Chancellor taking away some of the support for people on middle and lower incomes to give a tax cut down maybe down to 42p or 40p, I just don't think that would be fair," he declared.

"Although his backbenchers - you've heard from many former Conservative Chancellors and others - are pushing him to do that it would be putting ideology before the best interests of the country," added the Shadow Chancellor.

Mr Leslie said that the July 8 Budget should focus on boosting productivity and delivering "thoughtful" public service reforms to reduce the deficit without derailing recovery.

The tax credit cuts which many expect Mr Osborne to unveil as he sets out how the Government intends to deliver a promised £12 billion cut in welfare spending would "pull the rug from underneath" many low-paid workers, the Labour frontbencher contended.

He argued the loss would not be compensated by any further increases in the income tax personal threshold for many working families receiving tax credits, 60 per cent of whom earned less than the current £10,600 level at which the tax became payable.

"Decent wages should be reinforced and there should be greater protection for those 3.7 million working families who face losing on average £1400 a year in income if the rumoured cut to child tax credits occurs in that way," said the Shadow Chancellor. "That wouldn't address the challenges that working people face, it would add to them," he insisted.

The Shadow Chancellor made clear that while it was necessary to deal with the deficit, reducing it should be done through "sensible" savings in non-protected departments, "thoughtful" public service reform, early intervention, closing tax loopholes and tackling benefit fraud rather than through cuts which could undermine productivity.