LONDON (Bloomberg) - Chancellor of the Exchequer Alistair Darling pledged increased power for the Bank of England and the Financial Services Authority (FSA) to prevent a repeat of the crisis that plunged Britain into its worst recession in a generation.

"You'll see a significant toughening up of the regulatory system," Mr. Darling said in an interview with Sky News yesterday. "The regulators need to learn the lessons of what went wrong and we need to toughen up the regime to make sure that we reduce these risks."

Mr. Darling will this week publish proposals on the future of banking regulation after a drying up of credit forced the government to spend more than a £1 trillion bailing out lenders and sent the economy into a tailspin. Prime Minister Gordon Brown has faced mounting criticism of his 1997 decision to strip the central bank of its supervisory role and hand it to a newly created FSA.

"We've got to toughen up the regulatory regime, both the Financial Services Authority and the Bank of England," Mr. Darling told Sky. "We've got to make sure we've got the right tools to do the job. But we've also got to make sure we go back to responsible behaviour."

A new system is needed to prevent banks from acting in a "kamikaze" manner, the chancellor wrote in an article for the News of the World.

Currently, the FSA regulates banks while the central bank oversees interest rates and assesses threats to the economy. Mr. Darling has said he wants to maintain the balance of power in the system as talk of a turf war grew after Bank of England Governor Mervyn King called for more authority.

Since the credit crisis began, the UK has committed as much as £1.4 trillion ($2.3 trillion) to underpin the banking system through direct investments, asset insurance and underwriting loans.

The government nationalised Northern Rock plc. after a run on its deposits in September 2007, seized Bradford & Bingley plc. and took controlling stakes in Royal Bank of Scotland Group plc. and Lloyds Banking Group plc.

"The problem with banks is that we all need them," Mr. Darling said. "We're asking them to strengthen their own position. But we are also asking them to lend."

Last week, the government said that the recession had begun three months earlier than previously thought, in April last year rather than June, and that gross domestic product fell 2.4 percent in the first quarter of this year, the most in 51 years.

It means the recession already rivals that of the early 1980s, and most economists say it will be the worst since World War II.

Mr. Darling stuck to his prediction of a return to growth by year-end. His forecast of a 3.5 percent contraction this year is widely seen as optimistic, with the Organisation for Economic Co-operation and Development predicting output will fall 4.3 percent.

The damage wrought on the public finances has sparked a political row over spending, with the opposition Conservatives accusing Brown of misleading voters by claiming he can avoid spending cuts after the next election, due by June 2010.

Mr. Darling yesterday said the downturn had been sharper than he forecast at the time of the April budget, and signaled Britain's six million public-sector workers face a squeeze on wages, setting the stage for a clash with unions that finance his ruling Labour Party.