Darling denies rift with US over economy

As G20 finance ministers met in Brighton, Mr Darling struggled to maintain unity among Western nations wanting a coherent rescue plan

He tried to lower the temperature after France and Germany objected to a suggestion from new US Treasury Secretary Tim Geithner that all countries should have tax cuts and a spending boost worth two per cent of their national income.

Both Berlin and Paris are reluctant to get into deeper debt, but the Obama administration is keen to see other nations copy its own massive "fiscal stimulus".

In a compromise, the White House announced overnight that it did not want to write a "specific commitment" or percentage into the G20 deal expected when the full summit convenes next month.

Mr Darling said people needed "to be realistic" about how much agreement could be achieved at the summit, given the large number of participants.

The Treasury is itself reluctant to be pinned down to a specific figure for a fiscal boost.

The forthcoming Budget may feature some measures to boost spending, but it is unlikely to include the major increase expected by some.

The Tories have seized on recent tensions between the Treasury and No 10 over the recession.

Downing Street today said it did not want the G20 to be "overly-prescriptive" and it was up to "individual countries" to decide what was best for their own economies.

The Prime Minister's spokesman added "Of course, there's going to be a debate about exactly what we do. If we all agreed now precisely on what we needed to do there wouldn't be any point having a meeting."

The Chancellor is keen to focus instead on tougher regulation across the globe to prevent the future spread of financial chaos.

Mr Darling today said regulators should be allowed to monitor the overall financial health of institutions to stop them repeating the mistakes that triggered the credit crunch.

He also hopes to see an agreement on the regulation of the "shadow" banking system — such as hedge funds — and offshore tax havens.

Writing in the Wall Street Journal, the Chancellor said the IMF and World Bank need to be reformed and given extra resources to prevent the spread of financial contagion once a problem was spotted.

Mr Darling said that banks need to build up a "buffer" of cash in good years "so that when a downturn comes they are strong enough to continue lending to businesses and families".

"This weekend should be the next important step on the road to global recovery," he said.