The price of condoms is set to fall by 12.5 percentage points (10.6%) when they are reclassified as "essential" rather than "luxury" items under VAT regulations.

The chancellor, Gordon Brown, is understood to be preparing to include the measure, which will also affect other contraceptives such as the morning after pill, in his March 22 budget.

Reclassifying contraceptives from the 17.5% "luxury" rate to the 5% "essential" will cost £10m a year in VAT revenue. Campaigners have been arguing for the change to bring the price down, particularly so as to encourage teenagers to use contraception.