Balls calls for £6bn extra in housing as Labour battle hots up

He will be joined for the first time on the campaign trail by his wife, Yvette Cooper - the shadow work and pensions secretary - on a visit to a new housing development in central London to highlight his plan.

He will argue that the government should fund a rapid expansion of housebuilding from a 12bn "windfall" available because state borrowing for 2009-10 came in at 155bn - lower than Alistair Darling's forecast of 167bn in the March Budget.

The shadow education secretary believes that his plan could create up to 750,000 jobs in the private sector.

Meanwhile, the leadership battle sparked into life yesterday after one of the architects of New Labour, Lord Mandelson, warned that victory for Ed Miliband could take the party into an "electoral cul-de-sac".

Mr Miliband responded: "I think actually now Labour needs to move on. We need to address the country and talk about the issues that matter for the country and show that we can listen to the country, and that means we need to change."

Lord Mandelson's remarks got a frosty response from other leadership contenders.

Shadow health secretary Andy Burnham ?said: "It is time to free Labour from the grip of the warring elites trying to control our party." Diane Abbott said: "Lord Mandelson needs to understand that his era is over." Nothing could be more damaging to David Miliband than the impression that Lord Mandelson, Alistair Campbell and the old crew are behind him pulling the strings.

He kept out of the row, focusing instead on his vision of "the good society" offered by Labour in place of the "do-it-yourself" Big Society of Prime Minister David Cameron.