New Budget blow for smokers

Smokers suffered a second Budget blow today as the Treasury admitted that Gordon Brown made a mistake over the tax rise on cigarettes.

In his Commons speech yesterday the Chancellor announced a packet of 20 would go up by 8p, with immediate effect. However, guidance issued to retailers and published by the Inland Revenue showed the actual increase is just over 9p per packet.

The error came about because Mr Brown forgot to take account of VAT. When tobacco duty rises by 8p, smokers must pay VAT on the extra duty, putting a further penny on the price. A Treasury official conceded that it had been a "simple oversight".