Chancellor Gordon Brown's closest ally has said there is a "limit" to the role the private sector should play in delivering public services.

The Treasury's chief economic adviser, Ed Balls, has moved to ease fears in the Labour movement over the "creeping privatisation" of key services.

"We have to have the confidence to accept that there is a limit to how far you can apply market principles," he says.

"The NHS and our public services depend upon an ethic of public service and a commitment to the services. In an area like health or education, if you go down that marketising route, you run grave risks with that ethic of public service."