In an interview with CYP Now, Balls warned councils not to expect the Department for Children, Schools and Families to foot the bill for funding children's services entirely, including Lord Laming's costly child protection reforms.
"Local authorities have got to think hard about how they use their money and whether they've got the right priorities in their local decision making," he said.
"Local authorities can't make a decision on the council tax and other services and assume children's services money is going to be financed from the centre, it doesn't work that way."
Despite his warning, Balls pledged to "fight hard to get the best deal for children and young people" in this spending period and the next.
Responding to Conservative Michael Gove's plans to remove children's trust obligations, Balls warned the Tories' approach would "drive a coach and horses through Every Child Matters".
"Abolishing children's trusts would undermine the efforts of thousands of people in the public and voluntary sectors, by making it harder for them to work together," he said.
