The BBC's Ed Crooks reports: "The state of the economy today does look remarkably healthy"

The Chancellor told the Council for Foreign Relations in New York that the UK economy was on course to meet the higher end of his growth forecast - 2.75% in 2000 and 3.25% the year after.

In his most important statement on the economy's performance since the Budget, Mr Brown said the opportunity existed for a "virtuous circle" of low inflation, high investment and high, stable levels of growth.

The BBC's Chris Giles: "Lucky Gordon"

But he warned that he would not risk undermining this with a spending spree or tax handouts.

Mr Brown said: "In Britain we are working for stability and steady growth, and we can reach our full potential if we take the right long-term decisions.

Brown: "No short-termist dash for growth"

"It is only by tough discipline in monetary and fiscal policy that we have created a platform of stability over the last two years.

"We will not make the mistake of past governments which relaxed the moment the economy started to grow.

"The same tough grip will continue."

The Chancellor set out four key conditions for achieving its growth potential:

• Pro-active monetary policy and prudent fiscal policy

• Getting more unemployed off welfare and into work

• Responsible pay bargaining

• Investment in new technology and skills

"If we can achieve these, then I believe that the upper end of our growth range is within our reach."

The BBC's Ed Crooks: "The economy looks like living up to the most optimistic Treasury predictions"

He devoted little of his speech to the UK's possible adoption of the European single currency, restating the government's "wait and see" stance.

City analysts endorsed the Chancellor's vision of a prosperous Britain.

Director of the National Institute of Economic & Social Research, Martin Weale gives his assessment

Patrick Foley, chief economic adviser for Lloyds TSB bank, said: "I think his prediction is not far off.

"It is obvious that the economy is recovering more strongly than any forecaster predicted six months ago.

"I would not disagree with Mr Brown's analysis of 3% growth, in fact I would say it is quite likely."

Shadow Chancellor Francis Maude argues that Britain was "a whisker away from a recession"

However, the Chancellor's performance was condemned by his Conservative shadow, Francis Maude, who accused Labour of a "great betrayal" by increasing taxes.

He told BBC Radio 4's Today programme: "What's happened in the last year is that Britain came within a whisker of going into recession.