The next Labour government would not be able to simply increase tax credits for the less well-off as it did during the Gordon Brown years, Ed Miliband has said.
Speaking at a conference at the London Stock Exchange, the Labour leader said the public finances his party would inherit if it wins the next General Election would prevent a return to the kind of wealth redistribution of the previous Labour government.
Instead, Britain must shift to a more highly-skilled economy in a bid to ease the burden on the squeezed middle.
The UK must move away from its "low-wage economy" so that workers were better paid and could help stimulate economic growth, Mr Miliband said.
"The redistribution of the last Labour government relied on revenue which the next Labour government will not enjoy.
"The option of simply increasing tax credits in the way we did before will not be open to us."
Mr Miliband called for a greater emphasis on "predistribution", ensuring people are better paid rather than relying on tax credit top-ups.
"It is neither just, nor does it enable us to pay our way in the world.
"Our aim must be to transform our economy so it is a much higher-skill, higher-wage economy," he added.
Mr Miliband also said he did not think the Prime Minister’s new plans to rebuild the economy through relaxing planning rules would have "the success the Government is hoping".
"A one year holiday for the current rules on planning a conservatory extension for up to eight metres in a garden, which is what the Government is announcing today, does not represent an economic plan," he said.
Shadow chancellor Ed Balls added: "It's a mouse when we need a lion to roar."