Scotch whisky distillers welcomed the freeze on spirits duty, but the rest of the drinks industry and the tobacco manufacturers said tax increases in line with inflation would boost smuggling and reduce the exchequer's income.

Action on Smoking and Health (Ash) and Alcohol Concern both welcomed the tax increases, which would deter consumption.

Clive Bates, Ash director, said the chancellor had kept his nerve in continuing with real increases in tobacco tax against a "sustained campaign by the tobacco industry to reverse it".

But John Carlisle, of the Tobacco Manufacturers' Association, said the 25p a pack increase would encourage bootleggers. "Once again the government has failed to face up to the reality of the black market and provided even more incentive for the smugglers."

The Association of Convenience Stores said its members would see a further loss of business to bootleg tobacco. "The chancellor is undermining the government's health policy by allowing easier access to tobacco," said Trevor Dixon, chief executive. "More people will smoke as a result of this duty increase."

Detailed Treasury figures showed tobacco duties bringing in £7.4bn in 2000-01, compared with £8.2bn last year. The government estimates smuggling provides 18 per cent of cigarettes smoked in the UK and almost 80 per cent of hand-rolling tobacco.

Details of further anti-tobacco smuggling measures will be announced on Wednesday, which the Treasury believes will bring in an extra £315m in tobacco tax next year, rising to £1.17bn in 2002-03. It expects much of this to come from seizures made by additional staff with extra powers to search vehicles and scanning equipment to examine freight. It will also go ahead with stamping fiscal marks on tobacco sold in the UK to make it easier to spot contraband. But plans to date-stamp packs to stop the industry stockpiling ahead of budget tax rises have been replaced with restrictions on shipments from bonded warehouses after retailers said date-stamping would push prices up further.

The Campaign for Real Ale joined the Brewers and Licensed Retailers Association in attacking beer duty increases of 1p a pint. Labour has raised the tax by 3p a pint since coming to power.

Quentin Rappoport, director of the Wines and Spirits Association, said the industry was worried not only about smuggling but also legitimate cross-channel shopping. "A Volvo that comes back from Calais loaded with alcohol and cigarettes and a full petrol tank, costs the UK chancellor £460 in VAT and duty and provides £160 for the French exchequer."

r Rappoport said cross-channel shopping trips had risen 80 per cent in two years to 3m visits a year and provided one in seven bottles of wine drunk in the UK. He predicted the figure would rise to one in four next year with duty at £1.16 a bottle in the UK compared with 2p in France.

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