Chancellor Alistair Darling and Henry Paulson, the US Treasury Secretary, today admitted mistakes by regulators, banks and investors had led to the credit crunch but fell short of critising the huge pay packets awarded to failed financial executives.

Mr Paulson, on a two-day visit to the UK, was meeting Mr Darling and 40 business leaders to discuss Britain and America's response to the financial turmoil sparked by the credit crunch, including the rocketing prices of food and oil.

Speaking on BBC's Today programme, Mr Paulson said: "There's no doubt that there were mistakes made by many banks, by regulators and by investors. There's plenty of blame going on ... [But] we're looking ahead and the first focus is getting through this period with as little spill-over as possible on the real economy."

Mr Paulson said that the focus was to make changes to ensure that the financial sector did not repeat the mistakes that brought on the crunch.

"We're talking about regulatory practices, risk management practices, the changes we need in the US to deal with the regulation of our mortgage origination process and our securitisation process and changes to do with ratings agencies," he said.

"... we're looking at the whole regualtory structure and how our regulators can do a better job."

Both Mr Paulson and Mr Darling, who was speaking alongside his US counterpart, declined to comment on the huge financial rewards senior figures in banks and in regulation have received despite overseeing largescale failures.

Mr Darling declined to comment on the £612,000 payout received by Clive Briault, the former head of retail at the Financial Services Authority.

Mr Briault oversaw Northern Rock on behalf of the financial regulator but failed to spot the flawed business strategy that led to the bank's near-collapse and move into public ownership.

Commenting on the $50 million package handed to Chuck Prince after he was forced out as chief executive of Citigroup, Mr Paulson said that he did not think executive remuneration should be regulated. "This is a matter between boards and shareholders," he said.

Mr Darling denied that the worldwide liquidity freeze meant that the Anglo-Saxon system of laissez-faire capitalism had failed.

He said that the leaders of the G8 group of industrialised nations would discuss their response to rising oil and food prices when it met in Japan next month.

He also insisted that a global approach to the issue was required, rather than the rest of the world leaving it to the UK and US to sort it out.

Last night Mr Paulson said inflation was the top priority for a number of global economies, but said inflation in the US was "relatively contained" .

Meanwhile, Mr Darling acknowledged that oil, which reached a new record of nearly $146 a barrel today, was a "real problem" for Britain, adding: "We have got to ensure we can increase production of oil in the short-term ," he said.

Yesterday, lorry drivers attempted to bring London to a halt in protest at the high price of oil.

Today's discussions between the two Treasury leaders will include the Bank of England's £50 billion Special Liquidity Scheme, which was designed to encourage liquidity in the inter-bank lending market and in turn encourage lenders to pass on cheaper borrowing costs to first time house buyers and existing homeowners.

There is little evidence so far to suggest the scheme is having any positive effect on mortgage rates, as lenders continue to pull attractive mortgage rates from the market.

Mr Darling admitted that the scheme would "take some time to work its way through [the system]".

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