The Chancellor is keen to ensure that members of the family are fully consulted on every stage of the planning of the memorial, and that it should reflect the personal touch the Princess brought to her public duties.
Both the Prime Minister and Mr Brown are believed to favour a permanent tribute which would help continue the Princess's humanitarian work.
One of the ideas expected to be considered is the setting up of a national or international foundation in her name. This could be in addition to a physical tribute such as a statue.
Mr Brown has said the committee, the composition of which would be announced in the near future, should not be party political. He has also invited people to write to him in Downing Street or the Treasury, and asked for an e-mail address to be organised.
The amount of money available to honour the Princess's memory will be boosted by the Government's decision to give up its claim to VAT on the sales of copies of Elton John's new version of "Candle in the Wind". The tax, which could easily be more than pounds 1m, would be passed to the fund.
Sales of "Candle in the Wind" are expected to outstrip the 3.5 million copies of Band Aid's "Do They Know It's Christmas" in l984, and there are hopes the total revenue could be more than pounds 10m.
The Chancellor has also asked the Inland Revenue to publicise the fact that gifts of pounds 250 or more made to the memorial fund will attract tax relief.
The Prime Minister was not present at yesterday's meeting between Mr Brown and Lord Spencer. According to one report, Lord Spencer wants to press Mr Blair for a privacy law against media intrusion, which he condemned in his address at his sister's funeral at Westminster Abbey.
He is said to have received 27,000 letters from people supporting his remarks about Diana being "hunted" by the media and how the Spencer family would ensure the two princes escaped that fate.
It has been claimed that efforts have been made in South Africa by members of the press to obtain divorce papers filed by Countess Spencer, the former Victoria Lockwood.
Although divorce court documents in South Africa can be viewed by the public, it is illegal to publish the contents. The Spencer documents have now been withdrawn from public view.
Lord Spencer is also said to be considering taking the Guardian newspaper to the Press Complaints Commission after it reprinted photographs of the countess in a private addiction clinic.
Details of her condition, illustrated by long-lens photographs, were first reported in the News of the World two years ago. The article was found to be in breach of the commission's code of practice.
The Government has been cautious about taking steps on a privacy law in the current climate of emotion following Diana's death. It prefers a system of self-regulation by the newspapers.Reuse content