THE IMPRESSION of a British government now seriously playing-down expectations for the G20 summit continued to grow yesterday, amid damaging headlines reflecting some City concern about Britain’s mounting debt and her ability to repay it.

Some of the headlines may have been overheated in response to Wednesday’s failure of a £1.75 billion auction of government bonds. The Treasury had cautioned analysts against reading too much into one auction and chancellor Alistair Darling was able to reassure MPs that yesterday’s sale of government gilts was fully covered.

That did nothing to stem speculation about a possible rift between the Treasury and 10 Downing Street, however, in the continuing fallout from Bank of England governor Mervyn King’s warning that Mr Darling may not be able to afford another tax-cut and spend “fiscal stimulus” in next month’s budget.

While not ruling it out, prime minister Gordon Brown was widely regarded as signalling a retreat from that option during his visit to New York on Tuesday when he emphasised the importance of other measures being taken by his government, in particular “quantitative easing” – the printing of money to buy assets – in a bid to kick-start demand.

In the Commons yesterday Mr Darling also appeared to cast doubt on the prospect for agreement on a big spending package at next week’s summit. Echoing Mr Brown’s acknowledgment that individual countries would act according to their own timetables and conditions, the chancellor said no one was expected to turn up and put their budget on the table.

Mr Darling also denied there was any difference between him and Mr King over the handling of the recession, when pressed by Conservative “shadow” George Osborne to say if he agreed with Mr King that the fiscal position in the UK was not one that would suggest “another significant round of financial expansion”.

But while business secretary Lord Mandelson told an audience in Brazil that the main challenges facing leaders at the G20 were “confidence, confidence and confidence”, Mr Osborne mocked Mr Brown’s continued tour of world capitals in search of “consensus” ahead of the summit. “This is a defining moment in the history of this government’s handling of this recession when the governor of the Bank of England pulls the rug on the entire fiscal approach pursued by this government,” Mr Osborne charged.