Chancellor Alistair Darling today pledged that Labour will take whatever steps are necessary to deal with the volatility in global markets.

Speaking at the Labour Party Conference in Manchester, Mr Darling said: "My immediate priority now is to stabilise the economy, stabilise the financial system...it is important that all governments, no matter wherever they are, live within their means.”

Mr Darling also gave warning that solutions will require a high degree of international cooperation. However, he stopped short of following America’s plan to pump billions into ring-fencing banks’ toxic mortgage assets, despite calls from Henry Paulson, the US Treasury Secretary.

Mr Paulson said: “I'm going to be pressing our colleagues around the world to design similar programmes for their banks and institutions. Our system is a global one."

Mr Darling said today: "Just as one government alone cannot combat global terrorism, just as one government alone cannot deal with climate change, one government alone cannot deal with the impact of globalisation." .

Last week, the US Government unveiled a $700 billion (£379 billion) plan to restore confidence in the US banking system by pooling together billions of dollars worth of toxic mortgage-backed assets and placing them in a separate vehicle.

Mr Darling and Gordon Brown, the Prime Minister, are set to fly directly to New York from the conference to discuss tighter regulation of the financial industry with US officials.

Mr Darling said: "In the next few weeks Gordon and I will be in the US and in Europe and speaking to finance ministers around the world to put in place measures to help prevent the mistakes and misjudgments, which caused the crisis."

Mr Darling also told party delegates that he is starting to see signs that inflationary pressures are beginning to ease.

“Although inflation is higher than I would like, we are starting to see signs that it may be coming down with the oil prices coming down...every country in the world is going through one of the biggest shocks to the system that we have seen.”

His speech comes at a grim time for the UK economy, which many economists believe is slipping into recession as inflation and unemployment surge.

Yesterday, the Prime Minister said he was examining ways to clamp down on what he described as the "irresponsible" City bonus culture, which he said had compounded the recent problems. In comments made during an interview before the speech, Mr Darling said it was important not to incentivise people to take actions that risked destabilising the financial system.

“You want to make sure that when people are given incentives, they are incentives for the long-term good and that you don’t actually either inadvertently or carelessly incentivise people who destabilise the system.

“One of the things that our Financial Services Authority...is looking at how can you make sure the bonus structure, for example, in banks actually rewards long-term stability and does not encourage them to take risks.”

The issue of how banking executives are compensated has emerged as a key division in Washington, with Democrats lobbying for curbs on bonuses — a step rejected by Mr Paulson.

In an interview with The Times today, Yvette Cooper, chief secretary to the Treasury, also said there was a need to tackle City greed.

"Clearly mistakes were made and there has been greed and excess that's got to be dealt with," she said. "Changes need to be made."

Her comments were echoed by Lord Turner of Ecchinswell, the new chairman of the Financial Services Authority, who said that "very important questions" needed to be asked about the banking world's bonus system.

Mr Darling is likely to face fresh calls today from trade unionists for a windfall tax on energy company profits to help people struggling to pay their fuel bills.

Tony Woodley, the general secretary of Unite, is expected to lead the calls for the tax, which Mr Brown rejected earlier this month, instead opting for a package of energy-saving measures.

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