Gordon Brown said last night that the world economy faces its worst crisis for 30 years but insisted he would not be diverted from the Government's "tough and disciplined" policies.

The Chancellor's bleak comments fuelled speculation he is about to scale down his growth forecast of 2 to 2.25 per cent for the year 2002. City analysts have said 1.5 per cent is more realistic. Opening a debate on the Queen's Speech, Mr Brown said America, Europe and Asia were facing the "first simultaneous world slowdown for almost 30 years".

He said the G7 group of the leading industrialised nations were having the "sharpest reduction in growth since the recession in 1974 and the worst deterioration in industrial activity since the oil crisis". Countries outside the G7 were witnessing the "sharpest contraction" in world economic growth since 1974.

He said Britain was better placed to ride the storm because it was "holding fast to its economic disciplines", and dismissed suggestions of an imminent collapse in property prices, adding: "There will be no risk taken with inflation."

The Chancellor said the Government could not tolerate pay demands such as the 40 per cent submitted by the Fire Brigades Union.

Michael Howard, the shadow Chancellor, accused him of producing a "masterclass of complacency", adding: "Nowhere is the Government's failure more stark than in their failure to deliver on public services."