The chancellor has lost his most trusted adviser after Ed Balls was selected as a Labour parliamentary candidate.

Balls handed in his resignation as chief Treasury economic adviser on Thursday after being picked for the safe Normanton constituency.

He will now contest the seat, which has a Labour majority of 9,937, at the next general election.

Gordon Brown created the unique role for his closest political confidante after the 1997 election and the two have worked in tandem for over 10 years.

But the chancellor will now have to manage with his friend off the government payroll as the job, which was part civil servant and part special adviser, could not be held by an overtly political figure.

Brown said: "Ed has been a close colleague of mine for the last 10 years and I want to thank him for the great contribution he has made to the Treasury's work over the last seven, first as economic adviser and for the last five years as chief economic adviser.

"He has played a central and decisive role in developing and implementing policies to achieve economic stability and record levels of employment, to increase funding for public services and to tackle poverty in Britain and abroad. I know he has a great contribution to make in the future."

Treasury permanent secretary Gus O'Donnell announced that senior civil servant Michael Ellam will become the department's director of policy and planning.

Special adviser Ed Miliband will also have an enhanced role having returned to Brown's office as chairman of the Council of Economic Advisers in February.

O'Donnell said: "I would like to thank Ed for his outstanding contribution to the Treasury over the past seven years. He has had an enormous and positive impact on the department and its thinking which will continue to influence us in the future. He has also been a great colleague to work with and will be missed throughout the Treasury."

Balls said that it had been "a privilege to serve this government and this chancellor of the exchequer".

"I would like to thank Gordon Brown, Gus O'Donnell and all my colleagues for everything they have done over that time," he added.

"I have been constantly in awe of the professionalism, talent and dedication to public service of the Treasury civil servants and political team that I have worked with in the important work the Treasury has done over these years."

Candidate

Balls was selected for the Yorkshire seat at a selection meeting on Wednesday night.

He has carefully cultivated the candidacy since it became clear that sitting MP Bill O'Brien would be standing down at the next election.

Normanton is next door to the Castleford and Pontefract constituency - the seat held by Balls' wife Yvette Cooper, a junior minister in John Prescott's department.

Balls said he was "very proud" to have been selected for the area.

Brown said: "I am delighted. Ed will be a huge asset to the Labour Party locally and nationally."