Gordon Brown called on the world’s leading nations last night to fight the recession together by following China, Germany and Britain in giving financial boosts to their economies.

He told the Lord Mayor’s banquet that this was “no time for conventional old thinking or tired old orthodoxies” as he rejected “the old approach of short-term spending cuts in a downturn” that would hurt families and business.

Mr Brown, who earlier hinted at tax cuts and a spending boost in the forthcoming Pre-Budget Report, said that there was a growing international consensus that maintaining public investment was the right approach, “while allowing a temporary and affordable increase in borrowing to support economic growth”.

He praised China’s action in injecting $600 billion (£380 billion) to support its economy, the relaxation by the European Union of its spending restraints through the stability pact, Germany’s plans for a fiscal stimulus and Barack Obama’s signal that he would do the same. “Economic recovery will work better if we all work together,” he said.

In a speech ranging across international affairs, Mr Brown appeared to be sending a message to Mr Obama when he called for a rejection of “beggar-thy-neighbour protectionism” that has been a feature in turning past crises into deep recessions.

He also urged Mr Obama to make a Middle East peace settlement an urgent priority. Mr Obama’s election was a source of “hope and inspiration”, he said, as he urged the United States to join with Europe in building a new global order.

The Prime Minister called on fellow world leaders to “seize the moment” and lay the foundations for the “first truly global society”.

Addressing the banquet at Guildhall, Mr Brown said that the election of Mr Obama as America’s next president offered the prospect of a new “dawn of hope”, both in the US and the wider world.

“Just days ago, our closest ally gave new meaning to its founding creed that all are created equal,” he said.

Mr Brown, who flies to Washington this week for a financial summit of world leaders hosted by President Bush, said it was vital that countries did not retreat into protectionism and isolationism in the face of the global downturn.

“We have a choice: to retreat or advance; to turn inwards or to look outwards; to be cowed by our fears or led by our hopes,” he said.

“I want this to become the moment when we rise to the new challenges by purposeful visionary and international leadership, leaving behind the orthodoxies of yesterday and embracing new ideas to create a better tomorrow, not as the victims of history but as shapers of an open, free trade, flexible globalisation that is also inclusive and sustainable.”

Insisting that there was still cause to be optimistic about the economic outlook, Mr Brown ended by quoting President Roosevelt’s maxim that the only thing to fear is fear itself.

“When fear overwhelms our perceptions or reality the effect is paralysing; it leaves people frozen into inaction, helpless at a time of great risk and even at a time of great opportunity too,” the Prime Minister said.

“But confidence in the future, that most precious asset of all, is the key to bringing back confidence today.”

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