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1 April 2011updated 17 Jan 2012 6:01am

Ed Balls, new chief executive of the Labour Party

“We know Ed’s in charge. We just don’t know which one.”

By Dan Hodges

This week Ed Balls was formally appointed chief executive of the Labour Party. He has a board and a chairman to answer to. But make no mistake, the shadow chancellor is now running the show day to day.

“When it comes to anything that involves spending or economics, everything goes through Ed Balls,” said a shadow cabinet source. “We’re not able to do anything new without checking past him. He’s now on a par with Ed Miliband.”

According to another source, there is a joke currently doing the rounds of the shadow cabinet: “We know Ed’s in charge. We just don’t know which one.”

The launch of Labour’s local election campaign provided the answer.

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Some within the party have been urging Ed Miliband to seize the opportunity to open a new dialogue with the electorate over the economy and be more open in acknowledging Labour’s failings in office. Balls has advocated a different approach: neither apologise nor explain, but instead focus solely on the Tory cuts and the perceived damage these are doing to Britain’s fragile economic recovery.

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According to the verdict of the Financial Times:

Ed Miliband launched Labour’s local election campaign on Thursday with a strong defence of his party’s policy of reducing the deficit at a slower rate in order to stimulate the economic recovery. Whereas Labour’s last Budget had led to growth, the economy had “stalled” under the coalition’s radical deficit reduction strategy.

“Ed Miliband was actually quite sympathetic to the idea of being more open about the flaws in our past economic strategy,” said an insider. “But Ed Balls was having none of it. The stance Ed Miliband adopted at the campaign launch is 100 per cent his.”

The strength of the shadow chancellor’s position was emphasised in this week’s New Statesman politics interview.

Asked about his feelings at being passed over for the role in Ed Miliband’s first shadow cabinet, he provided a staggeringly frank response:

Yes. I didn’t agree with it. I wasn’t annoyed or disappointed, but I thought it was a mistake. And I said that to Ed.

He was equally open when discussing his appropriation of economic policy:

I set myself one task, which was to get Labour on to the front foot, back in the game, making the weather on the economy, and that’s going to take me a year.

Note: not us. Me.

Some MPs see Ed Ball’s elevation as further evidence of Ed Miliband’s weakness. “Ed’s people are terrified of Balls at the moment. They are desperate to keep him onside. They’ll give him anything,” said one backbencher.

Their jitters have not been eased by reports of a warming of relations between Balls and David Miliband. Balls was recently invited to be guest of honor at a fundraiser in the former foreign secretary’s South Shields constituency. In response, Balls used a recent Sunday Mirror interview to urge a swift return for the elder Miliband to front-line politics.

But others see a more nuanced relationship between Labour leader and shadow chancellor. “What people forget is Ed Miliband never had a machine,” says one shadow cabinet insider. “It’s one of the reasons the party warmed to him. But Ed Balls does have one. He has a large number of allies in the shadow cabinet, and friends on the back benches. He has supportive journalists he can call on. He has a strong presence on the blogosphere. Now Ed Miliband has got the Balls machine working for him. By and large, that relationship’s working.”

He does, however, insert a caveat: “The question is, can Ed Miliband ensure the machine keeps working for him, or will he end up working for the machine?”

Ironically, it was one of Balls’s most bitter enemies who this week cemented his ascendancy. David Cameron’s scripted, but no less petulant, gibe that Balls is “the most annoying man in British politics” enlivened Tory backbenchers and an otherwise unmemorable session of Prime Minister’s Questions. It also sent a message that was lost on neither the watching media nor the Labour benches: Balls is the man who rattles Cameron.

Ed Balls is also a survivor. There were many who thought his political career could not outlast that of his mentor Gordon Brown. There were many others who had that view reinforced by his defeat in the leadership election. The initial snub over the shadow chancellorship seemed simply to rub salt in the wound.

But, like another House of Commons visitor this week, Balls is back. In the space of just two months, he has gone from reluctant shadow home secretary to arguably the most influential politician in the Labour Party.

That is some achievement. And it’s an achievement whose significance clearly has not been lost on David Cameron and Ed Miliband.