The only way to get rid of it is to apply the update. I'm staying on 7.1.2 on all my iDevices until iOS 8 matures a bit more. The badge is a small price to pay for a stable OS.
When iOS 7 was released, I remember the complaints about the update taking up space on devices whose users weren't ready to update. At that time, I thought Apple announced something about being able to reject the update and free the space, but I don't see any evidence of that being possible.