The letter of resignation that Alan Johnson sent to his party leader yesterday represents the former postman's final delivery. Mr Johnson has stepped down as shadow Chancellor, citing personal reasons. But his turbulent three and a half months in the job, during which he has stumbled over the rate of VAT and the speed at which Labour planned to close the deficit, no doubt smoothed the way for the decision. Only last week Mr Johnson found himself being taunted in the House of Commons by the Prime Minister for his lack of economic grip. He also had to perform a spectacular personal reversal last month over his opposition to a graduate tax.

And so an impressive career in frontline politics, which has taken in the Home Office and the great departments of health and education, comes to a rather sad end. But as someone who came to a realisation early last year, when Gordon Brown was under serious pressure, that he simply had no appetite for the top job in British politics, it is not particularly surprising that Mr Johnson has decided to walk away from frontline politics now.

Fortunately the Labour leader, Ed Miliband, had talent to draw on in his emergency reshuffle. Yvette Cooper becomes Home Secretary. Douglas Alexander takes on foreign affairs. And Liam Byrne will shadow work and pensions. And most significantly, in the shadow chancellorship, Ed Balls now has the portfolio he wanted when he failed to win the Labour leadership.

Mr Balls will not need to buy a copy of Economics for Dummies (an unfortunate joke from Mr Johnson when he was appointed last October) to prepare himself for the job. But he does come with the significant baggage of being Mr Brown's principal economic adviser for more than a decade. Mr Balls will bring the killer instinct of an attack dog to the job. But the crucial question is whether he will also bring good strategic judgement.

Mr Balls yesterday set out his intention to challenge the "false claim of this Conservative-led Government that our investment in schools, hospitals and police, rather than the global financial crisis, caused the deficit". Mr Balls is right to point out that the Tories have shamelessly misrepresented the causes of the 2008 meltdown for ideological and political reasons. They have attempted to frame what was, at heart, a tale of private sector recklessness (particularly in the financial sector) as a problem of government over-borrowing. If we are to learn the lessons of the meltdown, that is a narrative that needs to be debunked.

Yet Labour did make mistakes over the economy, particularly in becoming over-reliant on the revenues from lightly regulated financial services and a property bubble. Mr Brown, as Chancellor, also ran a fiscal deficit at what turned out to be the very top of the economic cycle, leaving Britain less well prepared to deal with recession than other nations that had been more conservative with their public finances.

So Mr Balls needs to avoid the trap of arguing that everything about the previous government's record was without fault. Coalition ministers will be keen to cast Mr Balls as a deficit-denying throwback to the former regime. Mr Balls needs to find the right balance between attack and recognition of past errors.

This is a crucial moment in the political battle over the economy. It will soon become clear whether the Government's hasty deficit reduction strategy is likely to cure, or undermine, the economy. If it turns out to be the latter, the country needs a shadow Chancellor capable of holding the Coalition fully to account.