Getting people back into work has to be the first priority, Ed Balls said, as he visited a work centre with a new plan to tackle long-term unemployment.
The shadow chancellor met unemployed Londoners at Stratford's Workplace centre after unveiling plans for a new compulsory job scheme for anyone who has been looking for work for more than two years.
Mr Balls' idea was attacked by Prime Minister David Cameron, who dubbed Labour's position a "bizarre decision to support benefits going up faster than wages".
The Government said Mr Balls' funding for the idea - from changing pension tax relief rates - was the same as his pledge to reverse tax credit changes last year.
But Mr Balls rejected the charge, which comes ahead of Tuesday's Commons vote on Government plans to limit most working age benefits to a 1% rise, which Labour is set to oppose.
He said: "I wouldn't pay too much attention to the Government. We said before the last budget, at that time back in the spring, the Government could use the money for pension tax relief, capped at 20%, they could use that not to go ahead with the tax credit rise.
"But they went ahead with the tax credit rise. Nine months on, we have had a double dip recession, a 100% rise in long term unemployment, and the priority now is to get people back to work. It's the only way to get the welfare bills down."
Speaking during a regional visit to Derby, Mr Cameron said: "This is sort of reheating a rather unworkable scheme that we inherited in 2010 and I think what Labour really need to focus on is their bizarre decision to support benefits going up faster than wages, which is what they are going to be voting for on Tuesday."
Mr Balls said Labour's scheme would be available to people who worked at finding a job for two years but found themselves still unemployed after two years.
The plans are similarly designed to the last Labour government's youth unemployment scheme the Future Jobs Fund, which was scrapped by the coalition. Labour say the new plans could see 130,000 long-term unemployed people offered work for at least the minimum wage.