Brown go-slow on Euro inflation index

GORDON Brown is widely tipped to delay plans to switch to a controversial European inflation index in his pre-Budget report on Wednesday.

While he has pledged to give details of the changeover to the European Union way of measuring price rises, many expect the Chancellor to set aside a longer lead-in period, rather than starting to use the new index in January.

Brown said in June that the Bank of England's inflation target would in future use Europe's Harmonised Index of Consumer Prices (HICP) instead of Britain's long-standing Retail Prices Index (RPI).

But it seems increasingly likely that Brown will delay the switch, partly to give time for the gap between RPI and HICP inflation figures to narrow.

The UK housing boom, which shows up in the RPI but not in HICP, means the RPI is running at 2.6% while the European index indicates only 1.4%.

'I wouldn't necessarily expect the change to happen immediately,' said Ian Brinkley, chief economist with the Trades Union Congress.

The Bank is known to be unhappy about an early switch, not least because the European Union statistics branch is planning changes to HICP to take effect in 2005. That would mean Britain altering its inflation measure twice within 18 months.