Denise Mahoney: British consumers face the highest prices in Europe for many goods

Trade and Industry Secretary Stephen Byers made the announcement in a statement giving more details about the government's new competition policy.

Mr Byers told MPs he would do more to look at pricing in the UK.

He said: "There is widespread concern that prices paid in the UK for goods are higher than in other countries.

"I have begun today a study on international price comparisons which will help competition authorities to identify markets which require their attention.

"It will be made public so that consumers and others can comment. I will then decide which prices I will ask the director general to investigate."

The director general of the Office of Fair Trading is already looking into the pricing of cars, supermarkets and private medical insurance but more needed to be done.

At the heart of the proposals will be more powers for the OFT. Top of the list for review are the water and airport sectors.

The OFT will have a 20% increase in resources and as Mr Brown put it in his Budget speech it will be charged with a "pro-active remit to root out cartels and restrictive behaviour".

The move has been welcomed by consumers' groups.

Consumers Association spokeswoman Sheila McKechnie said: "The break with tradition in this statement is that the minister is saying that trying to protect soft markets at home does not make companies more competitive abroad.

"What makes your company really competitive is a good competitive market at home and the old style DTI which said let's protect British companies, let help them to export at the price of ripping off UK consumers.

"What the minister has said that strategy is at an end, neither he nor the chancellor yesterday believe it is the right way forward."

Shadow Trade Secretary John Redwood said the government had spent two years talking about lowering costs but had done nothing to further that.

'Poor man's Which?'

He said: "It is a cop out to say the government is to run a poor man's Which? magazine to tell us how much we're suffering and to take no policy action where they could to tackle the problem at source.

"There is no evidence that this government is the customers' friend. They talk about being so, they spin that they are but they flunk the decisions to actually bring the prices down."

Mr Byers also announced a consumer strategy White Paper to provide consumers with better information on their rights, enforce consumer protection law and provide better assurance of redress.

The OFT will be better-funded

He went to announce that the DTI would be publishing a consultation document to create an independent competition authority.

He said: "The time is right to introduce a modernised merger regime.

"Businesses need stability and confidence that decisions in these important areas are not taken for short term political considerations.

"I believe the present system could be improved if merger decisions were taken by independent competition merger authorities against a competition test."

There would be some industries, such as defence, which would need public scrutiny.

In his statement, the trade secretary told MPs he would be establishing a framework for utility pricing.