The Chancellor has warned against complacency over the economic recovery and urged governments not to cut spending too soon.

Speaking before the start of the G20 meeting at St Andrews this weekend, Alistair Darling said: “We must see through measures to support demand and repair the financial system.” He added: “We cannot yet be sure the global recovery has sufficient momentum to be sustained and durable.”

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

Their position may be challenged. Both France and Germany warned this year that stimulus spending must be curbed so that countries could start to cut their deficits.

The International Monetary Fund (IMF) is likely to back Britain and America, with a report this weekend warning 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.

“This underscores the extent to which the improvement in demand is largely driven by policy stimulus.”

Finance ministers and central bankers attending the G20 meeting will work on a task from their 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 critieria should be included, but the substantive work will not start until next year, officials say.

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

Among other items on the agenda are the environment and banking regulation. Britain and France are set to put pressure on other countries to follow their lead by stepping up efforts to clamp down on bonuses.

Stephen Green, head of HSBC and chairman of the British Bankers’ Association, has written to Mr Darling highlighting the potential danger of 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,” he said.

Mr Green indicated that the association supported the push by the G20 to strengthen financial regulations and to improve the rules over bonuses to stamp out incentives that encouraged financiers to take excessive risks, but he called for a proper assessment of the burden on banks from the host of new rules that have emerged from international bodies.

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