Yes, you are probably right - I misunderstood the question. You can still do it with report variables but it's not quite so straight forward. The key thing with report variables is that they are evaluated in the order in which they are created/listed - something you can take advantage of to do lots of seemingly impossible things.
In this case, off the top my head I would create two variables one that would reset to a known value (e.g. zero) each time the group changes and the second to increment based on the value of the first.
You could probably come up with a more elegant solution in VFP using "Run expression on entry or exit" functions.
The reason that I am proposing an alternative to your solution is that yours relies on an external UDF whereas these are somewhat self contained.
BTW how is "jolly old england" Has everyone become a vegetarian yet?