"It has been tougher in recent years and it is partly about the Iraq war and the way people have responded to that, it is partly about the terrorist attacks as well," said Mr Balls. "It would be silly for me to try to down play the importance of that. We know it is a very, very powerful and difficult issue you are dealing with. We have to find a way to move on and heal some of the wounds which exist."
He was speaking at a Labour conference fringe meeting where schools expressed their concerns about their new statutory duty to promote "community cohesion".
Tim Benson, head of Nelson Primary in East Ham, London, where 98 per cent of pupils are from ethnic minorities, told the meeting: "I have worked very hard to make my school socially cohesive.
"Something has changed in the last few years and the cause of that change was the invasion of Iraq.
"Many of the children in my school are called terrorists by the indigenous white population and many of the Muslim teenagers are encouraged to view the world in a very different way."
Carole Whitty, National Association of Head Teachers deputy general secretary, warned
that making community cohesion a duty, to be checked on by Ofsted from next September, was a "tick-box" approach that demeaned the issue.