The governor of the Bank of England last night warned Gordon Brown over the state of the nation's finances.

With the two men attending the annual Mansion House dinner, Mervyn King said that the public finances "have tilted more and more towards the spending side".

He added that he had been assured that "the projected rise in tax revenues over the next three years will...allow the scales to swing back to what is known in the trade as a sustainable fiscal position".

The chancellor used his speech to repeat his pledge that he will "both meet all our commitments and all our fiscal rules".

Brown also backed plans for a new European Union constitution, but he warned it must reflect "economic realities".