Oliver Letwin has accused the chancellor of gambling with the financial security of homeowners by launching on a pre-election spending spree.

At a speech in Leicester, the shadow chancellor said the Treasury was ignoring warnings from the governor of the Bank of England, Mervyn King, that current levels of public spending were unsustainable.

"The governor's language - as always with central bankers - was exquisitely subtle. But his message was clear," said Letwin.

"He was saying not only that the housing market has become overheated, but also that Mr Brown's spending spree is causing the economy as a whole to overheat."

Letwin said that the chancellor was ignoring the conclusions of economists who were arguing that an excessive deficit would feed through into inflation, forcing the Bank to increase interest rates.

"The chancellor - according to the spirit if not the letter of his own rules - should be moving into current balance or even surplus, and is instead running a huge deficit.

"The Bank of England is responding by raising interest rates over and over.

"And yet, all the indications are that, in a few days' time, the chancellor will announce a comprehensive spending review in which the big spending goes on, and in which all of his famed efficiency savings, if they materialise at all, will be plugged back into yet more government spending."

Letwin argued that the chancellor's hubris was leading not just to unsustainable levels of spending, but also increasing growth in the size of government.

"The chancellor's current highly inadvisable spending spree and his cavalier disregard for the governor's warnings are only part of the picture," Letwin argued.

"It is the long term economic damage caused by Mr Brown's big government that ought to concern us more. This is the terrible price of the chancellor's pride."

Letwin pledged that a Conservative government would roll back regulation and bureaucracy.

"Our aim is to provide Britain with smaller government that does less and does it better - a smaller government that can give Britain not only lower taxes and better services, but also the vibrant and competitive economy which alone can sustain first-class public services," he said.