Duty on spirits is to rise by 4% rather than the 8% announced by the Chancellor earlier this week, after the Treasury admitted that it had got its sums wrong.
The 8% hike announced in the pre-Budget report earlier this week had been intended to offset a cut in VAT of 2.5% - leaving prices broadly the same for consumers.
However, the 8% rise would have added almost 30p to the average cost of a bottle of whisky, as duty is charged according to alcohol content rather than the product’s price.
The Treasury confirmed yesterday that duty on spirits will now rise by only 4%, although the new 8% rate will apply to beer and wine.
The U-turn will come as a boost to the drinks industry, although pub operators remain furious that they will not benefit from the VAT cut.
Gavin Hewitt of the Scotch Whisky Association commented: “The SWA welcomes the Government's quick and positive action to ensure that the overall duty burden faced by Scotch whisky in its home market remains broadly unchanged as a result of this week's Pre-Budget report.”