ED Balls was last night installed as Labour shadow chancellor in a dramatic move following Alan Johnson’s resignation from the post after less than four months.

Johnson said he was leaving “for personal reasons” as Balls, the architect of Gordon Brown’s economic policy and a former treasury minister, returned to a role shaping the party’s economic stance.

Ed Miliband’s decision to shift Balls back into an economic brief signals a hardening of Labour’s stance on the deficit, with Balls insisting that there is “an alternative to the coalition’s austerity and cuts”.

The move is likely to lead to a more confrontational opposition to George Osborne’s cuts. Balls said in August: “It is time for Labour to take on and win the argument [on the deficit].”

While in office under Brown, he pushed for higher public spending as a solution to economic uncertainty and has advocated making the 50p top-rate tax permanent.

He is also known for a controversial and aggressive style that marked Brown’s years as Prime Minister and has been accused of regularly briefing against his political enemies.

His appointment is a reversal from a time when he was Ed Miliband’s senior at the treasury.

Dan Corry, former head of Gordon Brown’s policy unit and now at FTI Consulting, said: “Ed [Balls] will have to respect the fact that his old side-kick is the boss, but he has shown that he can buckle down for the cause.”

Michael Fallon, deputy chairman of the Conservative party said: “The man who is responsible for Britain’s economic mess has returned. The Labour party has learnt nothing and is now led entirely by Gordon Brown’s old team.”

Johnson’s resignation sparked a full-scale reshuffle on the opposition front benches. Balls’ wife, Yvette Cooper moved to shadow home secretary, while former Treasury secretary Liam Byrne, who famously wrote “there’s no money left” at the end of Labour’s term in office, takes over a shadow brief in work and pensions.

In a conciliatory move, Ed Miliband moved Douglas Alexander, who supported David Miliband in Labour’s leadership race, to replace Cooper as shadow foreign secretary.

EVERTHING YOU NEED TO KNOW ABOUT ED BALLS

Education: Balls was educated at Oxford and Harvard universities.

Economic theory: Closely allied to Brown, he was the author of a speech in 1994 in which Brown referred to “post neoclassical edogenous growth theory”. The convoluted phrase was mocked by senior Conservative Michael Heseltine who told his party conference: "It’s not Brown’s, it’s Balls!"

Regulatory policy: He was behind the creation of a tripartite regulatory system that split roles between the Bank of England, the FSA and the Treasury. He also signed off on Brown’s line that his policies would lead to “no more boom and bust”.

Euro opposition: Balls was instrumental in devising the “five economic tests” that kept Britain out of the euro despite Tony Blair’s push to join the single currency.

Bullying accusation: A Labour MP branded him a “bully” in 2009 over the appointment of a Children’s Commissioner, a claim Balls denies.

Bloomberg lecture: In August he gave a speech opposing urgent cuts to the public deficit.
Richard Partington