The proposal is part of the Department of Health's consultation, to be launched later this spring, which looks at ways to stop children smoking.

The relevant legislation could be introduced in the autumn.

But shopkeepers in the borough say the move could kill off small businesses.

Newsagent Douglas Hepburn, who has been running Mayfair News, in King Street, South Shields, for the last five years warned the new plans could put new and small firms out of business.

He said: "It's going to kill small papershops.

"Cigarettes are our biggest turn over but give the smallest profit. They are taxed up to the hilt and the only one making any money out of them is the Government.

"They are going to cause cigarette sales to go underground and then the only ones making any money will be the bootleggers."

Mr Hepburn, who is a smoker himself, added: "Even non-smokers think this one is ridiculous. People no longer have freedom of choice.

"It's people at the top trying to justify their jobs and I feel so sorry for anyone who's just starting out.

"Things like price marked cigarettes get our customers in and without displays we could lose out on that."

Kevin Carter, of Carters Newsagency in Dickens Avenue, South Shields said the new plans are 'ludicrous'.

He said: "We're going back into the dark ages – it's just ludicrous. If the Government wants to ban the sight of them, they should just ban them altogether.

"Smoking is not a good thing but the Government make millions of pounds in taxes and my feeling is if we put them under the counter where will those taxes come from?"

Neil Rafferty, a spokesman for the smokers' rights group Forest, said: "This is another attempt by the Government to stigmatise smokers and make them feel bad about themselves.

"It is a creepy and authoritarian measure. Tobacco is a perfectly legal product from which the Government makes more than £10 bn a year in taxes."

Other measures on the table include the outlawing of vending machines from pubs and restaurants and making nicotine-replacement gums and patches easier to buy.

Dawn Primarolo, the public health minister, said: "It's vital we get across the message to children that smoking is bad. If that means stripping out vending machines or removing cigarettes from behind the counter, I'm willing to do that."

According to the Office for National Statistics, the proportion of adults who smoke has dropped from 24 per cent to 22 per cent since a smoking ban in public places was introduced last July. The Government has a target of reducing the proportion of smokers to 21 per cent by 2010.

Shane Brennan, a spokesman for the Association of Convenience Stores, which represents 33,000 shops across the country, said: "This is going to be a massive burden on retailers and we are not sure that the end justifies the means. Cigarettes are already kept behind the counter."