He revealed Haringey’s children’s services could be delivered externally if progress is not made.
John Coughlan, Hampshire CC’s respected director of children’s services will replace Ms Shoesmith until Christmas while a new management is installed.
It has also been revealed that Haringey’s leader George Meehan and director of children’s services Liz Santry have resigned.
Mr Balls said: “My first priority is to put in place a new leadership and management team in Haringey children’s services to ensure that vulnerable children in the borough are properly protected.”
Mr Coughlan’s deputy will be Kensington & Chelsea LBC’s director for family services Libby Blake. Mr Coughlan and his eventual successor will be told to address staffing issues and provide the minister with monthly progress reports.
Ofsted will complete another report into progress by next summer.
Mr Balls said: “On the basis of these regular reports and the report from Ofsted, I will then decide whether further sanction is needed - and in particular whether I should use my statutory powers to require the council to enter into a contractual arrangement with an external provider for the delivery of some or all of its’ children’s services.
“And in the meantime, if I am not satisfied that there is sufficient progress, I will not hesitate to intervene again.”
Meanwhile, health secretary Alan Johnson is to announce that the Healthcare Commission will analyse whether national child protection standards have been applied sufficiently vigorously.
Shaun Kelly, Head of Safeguarding at Action for Children, said: “In order to better help those working to identify vulnerable and at risk children, current good practices need to be strengthened and staff need the appropriate training, support and management when making complex and difficult decisions.”