Darling plays down rift with King

LONDON (Reuters) - Chancellor Alistair Darling tried to play down an apparent rift with the governor of the Bank of England on Thursday after media honed in on differences in their priorities for financial regulation.

Bank Governor Mervyn King had delivered a sharp critique of banks "too big to fail" in a speech late on Wednesday, which was batted away the same evening by Darling, who said size was not a key factor when considering dangers to the financial system.

After heavy media coverage of the clash, Darling tried to smooth over differences on Thursday.

"If you take regulation, both of us know that we've got to toughen up the system," Darling told Channel 4 News. "Both of us think it is important that we get it right, and therefore you've got to make sure the structures you've got, the tools to do the job, are right. So we are in exactly the same position."

Darling also insisted that King supported his fiscal policy, which the Conservatives damned on Thursday when official data showed public borrowing hit a record high in May.

"On fiscal policy we are at one," he said.

Public spending has become a key electoral battleground ahead of a national election due within a year, with each of the main parties accusing the other of planning to slash public services to rein in ballooning public borrowing.

The Conservatives have a 14-point poll lead over Labour, putting them on track to win a parliamentary majority.

"Mervyn King said that we were right to support the economy now. He went out of his way to say that, and he said you have also got to make sure that as you come into the medium term you recover the position. That is exactly my position, so there is no difference there," Darling said.

(Reporting by Avril Ormsby, writing by David Milliken, Editing by Chizu Nomiyama)