Gordon Brown signalled yesterday that he will target tax cuts at low-income families in Britain to combat the effects of recession and issued a strong warning to Barack Obama not to lead the United States into economic protectionism.

Speaking in New York before the G20 summit in Washington, Mr Brown outlined his prescription for global economic recovery, specifying that tax cuts would have to be aimed at low-income earners, as they were the people "inclined to spend" any extra funds they received.

Tax measures are widely expected to be part of the pre-Budget report to Westminster, and Mr Brown focused yesterday on measures which might work to stimulate recovery.

He hinted that further drops in the Bank of England interest rate, already cut by 1.5% to 3% earlier this month, might be needed and that investment in green technology jobs should form part of the response to the economic crisis.

In a speech to New York's Council for Foreign Relations, he acknowledged there were time-lag problems with increasing public spending on infrastructure projects. He also accepted many people might save the tax cuts rather than spend the money to keep the economy churning. "People on low incomes have a higher propensity to spend if their credits are higher," said Mr Brown.

Any cuts will have to be paid for with future tax rises, he hinted. "I think that these cuts have to be necessary to take us out of this position and secondly that there has to be a path back to sustainable finances," he said.

Mr Brown arrived in America for the G20 summit on the world financial crisis as something of a feted economic guru. The former US Treasury Secretary Robert Rubin, who hosted a breakfast question-and-answer session in New York, hailed him as an "acclaimed leader" and one contributor addressed him as "excellency".

With his reputation going before him, Mr Brown took the tax-cutting agenda as one of the central messages to a series of bilateral meetings with other world leaders and a White House dinner last night. "The benefits of a fiscal stimulus, temporary as it might be, would be all the greater if other countries are part of it," he said.

He called for a restoration of the "visionary idealism" that shaped the post- Second World War international economy at the Bretton Woods summit in 1944, with which this weekend gathering is being compared.

The situation demanded a co-ordinated response to prevent an economic depression, which would tempt countries into protectionism. "I think it can be done," said Mr Brown. But, on the day RBS announced 3000 redundancies worldwide, he warned: "It was an illusion to give the impression that every job at risk will always be there when the crisis is over".

He also stressed that economies had to move away from an over-reliance on volatile commodities such as oil, a broad economic observation with a tailored domestic sting in the tail for the SNP's economic ambitions for an independent Scotland.

The Prime Minister also issued a thinly veiled warning to President Elect Barack Obama not to retreat into isolationism. "The way forward is not countries working in isolation or against each other, but countries co-operating, together," he said Mr Obama, who takes office in January, was elected on a pledge to renegotiate the North American Free Trade Agreement to favour the US labour force. He is also under pressure to bail out the big three US car manufacturers - Ford, Chrysler and General Motors, which are in danger of collapse or merger. Such huge subsidies would frighten the European Union and other participants of the G20.

Mr Brown is optimistic about agreement for a World Trade Deal: "There are only a few details to be sorted out. If we could announce a world trade deal we would have what has been missing, which is the most precious asset of all, confidence about the future."

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