In his pre-budget speech on Tuesday, Mr Brown said the first cash injection would take place next April when tobacco duty is to rise by five per cent in real terms.

That will generate an extra £300m a year for the health service.

Mr Brown said decisions on the level of tobacco duty would continue to be taken as part of his annual budget.

But he added: "There is a strong public health case for year on year real term increases in the price of cigarettes.

"This government is serious about tackling the deaths, disease and health inequalities caused by tobacco."

Encourages smuggling

Chris Ogden, director of trade and industry affairs for the Tobacco Manufacturers Association told News Online that the Chancellor's move would encourage smuggling of cigarettes into the UK at time when ministers had announced new measures to combat the problem.

He said: "The UK's tobacco tax is so far out of kilter with Europe and the rest of the world, and any further increase would provide an irresistable lure for smugglers."

Amanda Sandford: "This is excellent news"

Amanda Sandford, of the anti-smoking charity Action on Smoking and Health (ASH), said the announcement was "excellent news".

She said: "We believe it is the first time a government has allocated money raised from taxation in this way, and if it is going to the NHS then we can think of no better place for the money to go.

"We would also hope that some of the money will go to helping people to stop smoking, as this has been shown to be one of the most cost effective ways to use money in the health service."

Treating smoking-related diseases costs the NHS £1.7bn a year, according to the Department of Health.

Mr Brown also said extra funding for the health service would be found in next year's second comprehensive spending review.

In a crackdown on cross-Channel tobacco smuggling, Mr Brown also announced a package of hard-hitting measures including a network of x-ray scanners to detect shipments of contraband tobacco and the compulsory marking of cigarette packs.

All cigarette and tobacco packs with UK duty paid will be stamped to make identification of smuggled tobacco easier for Customs from 2001 while a national network of scanners will help detect illegal shipments in commercial containers and freight.

Previous cash injections

The Chancellor announced £21bn would be invested in the NHS over three years in his comprehensive spending review in July 1998.

In addition during his pre-budget speech last November, Mr Brown announced an extra £250m for the NHS to be used to help the service cope with increased demand in the winter months.

This did not stop complaints that the NHS failed to deal adequately with an upsurge in flu cases in the new year.

Another £430m was made available in the budget in March to upgrade accident and emergency departments across the country.

At the time of the comprehensive spending review, the then health secretary Frank Dobson promised that the £21bn would kick start a 10-year modernisation programme.

The main points were:

• Up to 7,000 more doctors and 15,000 more nurses to be appointed over the three-year period.

• An extra 6,000 nurse training places to be created.

• Medical school places to be increased.

• Three million more patients to be treated.