He said that the international financial system, which had been established in the l940s, needed to be fundamentally reformed to take account of the growing globalisation of financial markets.

As president of the G7 finance ministers, Gordon Brown was instrumental in negotiating the package of measures that has now been agreed by central bankers and finance ministers from the USA, Japan, Germany, France, Italy and Canada.

The plan was announced simultaneously in world capitals over the weekend.

The Chancellor made clear that the international financial crisis had affected everyone in Britain, and that preventing it getting worse was in Britain's vital interest.

Crisis prevention

The central plank of the reform plan is the creation of a new emergency lending facility by the International Monetary Fund to provide funds for countries before they face a run on their currency.

The new facility will be funded out of the $90bn increase in the IMF quotas that has just been approved by the US Congress.

The first payments are expected to be made available to Brazil, whose currency has been under speculative attack since the collapse of the Russian currency, the rouble, over the summer.

There would also be a special World Bank facility to help the victims of the crisis - for example in Indonesia, where 50% of the population is now below the poverty line.

Better regulation

The UK government was also supporting moves by improve the regulation of the international financial community, including more disclosure by banks of their risky lending, and better international coordination between the main regulators.

The Bank for International Settlements and the international securities regulators should work together to encourage common standards to regulate hedge funds, which all countries should be encouraged to adopt.

"We will not let high-risk hedge fund speculation by the few translate into a wider risk for the many and destabilise the financial system on which we all depend for prosperity," Gordon Brown said.

The Chancellor emphasised that problems in the banking systems of foreign countries could have serious "contagion" effects that could threaten banks in the UK.

More private sector help

The government made it clear that it expected the private sector to play its role in helping resolve the global crisis, and ensuring the survival of sound companies.

"I do say - and this refers to other issues as well - that the private sector must now play its part in helping resolve some of the crises that arise from the operation of the financial markets," the Chancellor said.

These measures would include clauses to ensure that all debtors work together to agree debt repayment plans, and Codes of Conduct for good governance that would be produced later this year by the OECD.

Conservatives sceptical

The Shadow Chancellor, Frances Maude, said that the package of measures was a diversion from the real problems of the UK economy.

"This is less about the global financial architecture than about distracting attention from Britain's looming downturn," he said.

And other Conservatives attacked the Chancellor for not criticising the lack of transparency in the European Central Bank.

But Mr Brown hit back.

"I know the Conservative Party want to opt out of Europe. Now it seems they want to opt out of the whole world," he said.

Much of the sparring foreshadowed the economic forecast that the government will release tomorrow when it makes a pre-budget statement.

The growth of the UK economy is widely expected to be downgraded to around 1% next year, compared to the previous forecast of between 1.75%-2.25%.