Labour has vowed to oppose the 1% cap on benefits payments proposed by Chancellor George Osborne in his Autumn Statement.
Ed Balls confirmed the decision at Treasury Questions in the House of Commons, claiming the measure is unfair.
The Chancellor sprung a political trap by including the cap in his mini-Budget, attempting to dare Labour to choose between the "strivers" and the "skivers".
Under the move, benefits and tax thresholds will only rise by 1% for the next three years - a below-inflation increase set to save £3.7bn.
There has been anger that maternity pay and child benefit will be among the payments hit by the squeeze, although the basic state pension, carer and disability payments are exempt.
The cap will have to be introduced via new legislation. A Welfare Uprating Bill will be tabled shortly, which Labour will vote against.
Mr Balls said: "We will look at the legislation but, if they intend to go ahead with such an unfair hit on middle and lower income working families while giving a £3bn top rate tax cut, we will oppose it."
Mr Osborne wants to break the link between welfare payments and inflation, which earlier this year saw benefits uprated by 5.2%.
He has previously said workers resent leaving their homes early in the morning while benefits-claiming neighbours sleep on with their curtains drawn.
But Mr Balls, speaking in the Commons, claimed the Chancellor was making "striving, working families pay the price for his economic failure".
Mr Balls added: "Sixty per cent of families hit by the tax changes are in work.
"According to the Institute for Fiscal Studies, as a result of the Autumn Statement measures, a working family - the average one-earner couple - will be £534 a year worse off by 2015.
"These are the very people who pull up the blinds and go to work."
But Mr Osborne said: "Of course tax credits go to some people in work, but we are also helping those people with a personal allowance increase, and working households are £125 better off."
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