The government should not unveil any further fiscal stimulus in April's budget as Britain's public finances are already in such dire straits, Mervyn King warned today.

Appearing before the Treasury select committee, the Bank of England governor said: "Given how big those deficits are, I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits."

"There is no doubt that we are facing very large fiscal deficits over the next two to three years," he added.

The chancellor of the exchequer, Alistair Darling, introduced a £20bn stimulus package in November, but King said the government should be careful about further plans as the country's public coffers are under even greater pressure from falling tax revenues and higher benefit payouts. Darling will unveil his next Budget on 22 April.

The governor's caution over a second round of fiscal stimulus measures followed a call from former cabinet minister, Stephen Byers, for the chancellor to abandon the centrepiece of his November package - the temporary cut in VAT to 15%. He said it had "run its course both in terms of its overall benefit to the economy and in relation to the political return that comes to the government".

The Office for National Statistics last week reported a £9bn deficit in February, bringing total public-sector net borrowing for the first 11 months of the fiscal year to a record £75bn - more than £50bn higher than for the same period last year.

King also revealed that the Bank's purchases of gilts in its quantitative easing (QE) programme may end up being less than the planned £75bn pounds if the programme works.

Graham Turner at GFC Economics said: "If a central bank is going to do QE, it is pretty pointless flip-flopping on the amount of bonds that may be bought, particularly straight after the release of a higher than expected inflation report. It sews significant doubts in the minds of gilt investors: the BoE is not really committed to QE, because it genuinely fears a return of inflation. The policy is unlikely, therefore, to succeed, which is unfortunate, because so far the evidence of QE pushing corporate borrowing costs down is limited anyway."

Meanwhile, tension is expected to mount between the prime minister, Gordon Brown, and European Commission president, Jose Manuel Barroso, over further fiscal stimuli when they meet this afternoon at the London summit on the financial crisis. Brown said Europe may not have done enough, despite injecting nearly £370bn into EU economies, and that the G20 meeting may have to make further decisions on spending, but Barroso is trying to rein in the Prime Minister's ambitions.

Shadow chancellor, George Osborne, said: "Today, not only has a former Labour cabinet minister attacked the ineffective VAT cut, but the governor of the Bank of England no less has said Britain cannot afford a further fiscal stimulus. He goes on to say that monetary policy should be the main tool to tackle the recession.

"This is hugely significant, as it completely vindicates the big decision taken by David Cameron and myself on the economy, and it leaves Gordon Brown's political plans for the G20 and the budget in tatters. It is the prime minister who is now isolated at home and abroad."