Smoking ban will lead to £1.1bn loss for Treasury

The size of the losses to the Treasury will leave Mr Brown with a substantial hole to plug, possibly by raising taxes on other luxuries or cutting spending.

"It's enough to make the Chancellor take up smoking," said one senior Tory MP, who voted for the ban. The estimate is based on the 700,000 smokers the Government believes may quit the habit as a result of an all-out ban being imposed on smoking in pubs and clubs. The estimate of the lost revenue was produced by Department of Health economists in a regulatory impact assessment slipped out with the Health Bill. The Chancellor is working on his own figures for the Budget on 22 March, Treasury officials said.

The report did say that reduced health costs and increased productivity as a result of people quitting smoking could see savings of more than £2bn.