Chancellor Gordon Brown is to defend his handling of the economy following the recent stock market falls.

He will insist the country is unusually well placed to weather the international storm in a major speech on Monday.

Mr Brown will say the true test of economic policy is "whether it can cope with difficult as well as good times".

Britain has continued to grow over the past six years while every other country has been in recession Gordon Brown Chancellor

"Our system will demonstrate credibility and resilience," he will say.

On Friday, the National Institute of Social and Economic Research (NIESR) suggested that Mr Brown's predictions for 2003 were too optimistic.

It says the UK will see only a weak recovery in 2003, with further falls in public finances and tumbling house prices.

At the speech in London, the Chancellor will that the recent volatility in global stock markets demonstrated that "no country can insulate itself from the ups and downs of the world economy".

"I understand the concerns that uncertainty causes for investors and consumers alike," he will say.

"It is because we have always understood that monetary and fiscal regimes must work well in challenging times as well as good times."

Recession warning

Mr Brown has been forced to down-grade his forecasts for economic growth.

But he will say that the government sought to ensure that Britain was better placed than it has been in the past to deal with "economic shocks of this kind and the ongoing risks of recovery".

"Instead of being first into recession and last out, the country that normally suffers most, Britain has continued to grow over the past six years while every other country has been in recession."

Earlier, Tory Treasury spokesman Howard Flight broke with convention when he warned that Britain was facing a 1930s-style crash.

Politicians usually avoid predicting economic problems.

Millionaire City banker Mr Flight said: "If you get a 1987, where the stock market falls then immediately recovers, both the economic and political effect scarcely exist.

Not immune

"Where you get something analogous to what happened in the later 1920s and early 1930s which, alas, is what is happening today, then the economic and political impact is potentially huge."

However, a Labour spokesman said the Conservatives wrongly predicted a recession in the late 1990s.

"Yet they failed to foresee the recessions over which they presided in the 1980s and early 1990s," he said.

"The truth is that while we can never be immune from the difficulties of the global economy thanks, to the tough decisions taken by the Chancellor, Britain is much better placed than other countries and than we were under the Conservatives."