Alistair Darling has warned countries not to be "complacent" about the economic recovery and urged them not to cut spending too soon.

Speaking ahead of the official start of the G20 meeting in St Andrews this weekend, the Chancellor said: "We must see through measures to support demand and repair the financial system."

The Chancellor added in a speech at the annual dinner of the Insurance Society of Edinburgh: "We cannot yet be sure the global recovery has sufficient momentum to be sustained and durable."

The UK and US are set to unite around the theme that the global stimulus must continue at the G20 meeting. The UK is the only major economy still to be mired in an economic slump, while the US unemployment rate rose to 10.2 per cent, the highest in 26 years, data showed today.

Their position may be challenged in St Andrews by other countries. Both France and Germany warned earlier this year that stimulus spending needed to be curbed so that countries could start to cut their deficits.

The International Monetary Fund is likely to add weight to the UK and US, with a report due out this weekend which will warn of the dangers of premature spending cuts.

The IMF paper will say: "The pace of recovery is uneven, particularly in advanced economies, with consumer confidence remaining subdued, the waning of temporary fiscal measures such as the cash for clunkers programme in the US and similar programmes elsewhere is slowing production."

The IMF will add: "This underscores the extent to which the improvement in demand is largely driven by policy stimulus, with a turn in the inventory cycle also playing a part."

Finance ministers and central bankers from the rich and developing countries attending the G20 meeting will work on a task from the Pittsburgh meeting in September for each nation to formulate an economic plan. The plans will be audited by the IMF and subjected to peer review.

Progress is expected to be limited on the plans in St Andrews. There may be agreement on what criteria should be included, but the substantive work will not start until next year, officials believe.

However, the UK and US will want to ensure that they win an agreement from other countries that the plans will focus on co-ordinating the timing of the withdrawal of financial stimulus.

Banking regulation is also set to be on the agenda. Mr Darling signalled to the gathering in Edinburgh — one of the UK's largest centres of financial workers — that the European Commission's measures to force Lloyds and Royal Bank of Scotland to split off businesses would not unduly harm Scotland.

He insisted that the divestments would "boost competition".

Another issue which will be discussed ahead of the UN's meeting next month in Copenhagen is how to finance improvements to the environment. Rich countries are under pressure to agree annual sums they will hand over to developing countries to meet goals on emissions. However, officials are cautious about how much progress will be made in Scotland.

The UK and France are set to put pressure on other countries to follow their lead by stepping up their efforts to clamp down on bonuses.

Stephen Green, head of HSBC and chairman of the British Bankers' Association, wrote to Mr Darling on the eve of the meeting, highlighting the potential danger of the Britain acting unilaterally in clamping down on banks and their employees.

"It is imperative that the UK moves broadly in line with other nations in implementing reforms," Mr Green said.

The BBA supports the push by the G20 group of rich and developing nations to strengthen financial regulations and to improve the rules over bonuses to stamp out skewed incentives which encouraged financiers to take excessive risks, Mr Green signalled.

But he stressed the need for co-ordinated action and called for a proper assessment of the burden on banks from the host of new rules from international bodies which are coming down the tracks.

"We are anxious that the cumulative impact and internal consistency of the measures being proposed be assessed at an early stage," Mr Green wrote.

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