Cigarettes are going up by 25p a packet from Tuesday night - rising 5% above the inflation rate.

The money will be channelled straight into the National Health Service, as promised in Chancellor Gordon Brown's November pre-Budget statement.

But the tobacco industry warned of thousands of job losses and condemned the rise as "a smugglers' charter".

The tobacco duties will be spent on improving NHS healthcare to the tune of �300m a year.

The rise was in line with the government's long-standing commitment to increase the duty on tobacco by 5% above inflation every year.

Burning money: Cigarettes are increasing by 25p a packet

Mr Brown also announced new measures to tackle tobacco smuggling - which costs the Treasury billions of pounds in lost tax revenue each year.

He said in his Budget speech: "Cigarette taxes will rise by 5% above inflation from tonight - by 25p a packet - with every penny of the extra revenue going - as I promised - to funding our hospitals and the National Health Service."

Brenda Warrington, chairwoman of the Tobacco Workers' Alliance (TWA), said the jobs of 9,500 people employed in UK tobacco manufacturing were at risk.

"The government seem intent on damaging the employment prospects of workers in the tobacco industry, whilst increased criminal smuggling activity means that their health and law and order policies suffer," she said.

Black market

John Carlisle, of the Tobacco Manufacturers' Association, added: "Once again the government has failed to face up to the reality of the black-market in tobacco products and provided even more incentive for the smugglers.

"Although the additional measures to assist Customs are welcome, the root cause of the problem, the enormous disparity in tax between the UK and the EU, remains.

"There will be further loss of revenue to the government, encouragement to criminal gangs and many small retailers will go out of business."