A tax of €2 should be imposed on every pack of cigarettes sold in the State, a leading economist has claimed.

Mr Austin Hughes, chief economist with IIB Bank, said that if the Minister for Finance, Mr McCreevy, wished to raise revenues to meet current spending commitments, he must be "focused", rather than imposing widespread duty increases on "the old reliables".

A €2 increase in cigarette tax could, Mr Hughes believes, be presented as the sole increase in indirect taxes in December's budget.

"This would raise something in the region of €600 million which would underpin health spending and go some way towards maintaining the real value of tax bands and allowances," said Mr Hughes, who was addressing a Small Firms Association conference.

Mr Hughes acknowledged that such a move would have an inflationary impact, but argued that it would possibly be "far less inflationary" than broader tax increases.

He also said that a €2 increase would probably have less effect on inflation than the 50p rise implemented two years ago.

He said that this increase, which added 0.7 per cent to the inflation rate, was "big enough to be troublesome but not large enough to cause analysts or wage bargainers to exclude it from calculations".

In contrast, said Mr Hughes, a price rise of larger proportions would be too large to be ignored.

"Introducing this measure ahead of talks on a new pay deal makes it more likely that unions would agree to focus on inflation, excluding tobacco as the appropriate inflation measure in pay talks," he said.

Earlier, Dr David Madden of UCD at the Economic and Social Research Institute's Budget Perspectives conference said that the optimum taxation per pack of cigarettes was in the order of 60 or 70 cents.