Chancellor Alistair Darling has pledged action over weaknesses in the financial system ahead of his speech to the Labour Party conference in Manchester.

He promised to avoid "knee-jerk" reactions but instead take measured decisions for long-term stability.

His speech comes as experts say taxes will have to rise as borrowing soars.

Asked by the BBC if income tax would go up Mr Darling declined to answer "yes" or "no", instead saying "it is not the time to take money out of the economy".

When asked again, Mr Darling told the BBC that the time to pay back debt was when the economy was doing better.

He also said that at the moment, rather than increasing taxes, basic rate tax payers were paying less tax this month.

He rejected calls from union leaders and MPs on the left of the party for tax rises for the wealthy and also for a energy windfall tax.

"I don't want to destabilise the tax system," he said.

Referring to the government's recent energy efficiency initiative, he added: "We have got out of the energy companies rather more, I suspect, than we would have got out of a windfall tax."

Mr Darling encouraged banks to behave "responsibly" in the current crisis but would not commit to action to curb City bonuses, saying this was just one issue being looked at by financial regulators.

"We need to toughen up the system but we need to do it effectively and in a way that works," he said.

Mr Darling also gave strong support to Gordon Brown, saying the prime minister was a man of "conviction" and "remarkable resolution", adding that the cabinet was "remarkably unfactional".

The chancellor and Prime Minister Gordon Brown will fly from the conference to New York to seek international agreement on tighter regulation of the financial sector.

On Sunday, Mr Brown told the BBC he was considering a crackdown on "irresponsible" City bonuses which encouraged "excessive" risk-taking.

'Mistakes and misjudgements'

In his keynote speech, Mr Darling will commit to taking whatever steps necessary to tackle turmoil in the markets, but will also warn that solutions to the problems of globalisation will not be found by one government alone.

Mr Darling will say: "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.

"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 misjudgements which caused the crisis."

Meanwhile, unions are expected to use the conference to demand a windfall tax on energy firms to help impoverished households pay their gas and electricity bills.

The demands for a levy, which was rejected by Mr Brown earlier this month, are expected to be spearheaded by Unite general secretary Tony Woodley.

However, due to a rule change, unions and activists will not be able to force a vote on whether to make such a tax Labour Party policy.


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