The Chancellor was forced to backtrack on a key element of his Pre-Budget Report (PBR) on Wednesday after he admitted that the Treasury had got its sums wrong and raised the duty on spirits by too much.

The proposed duty rise of 8 per cent announced on Monday, part of a package of duty increases designed to offset the cut in VAT from 17.5 per cent to 15 per cent, has been halved to 4 per cent to leave the cost to the consumer broadly unchanged.

The Scotch whisky industry had pointed out that the 8 per cent rise would have increased the average bottle of whisky by 29p, whereas in his Commons speech the Chancellor had said that the duty measures “should keep the overall cost to consumers the same this year”.

Gavin Hewitt, chief executive of the Scotch Whisky Association, said: “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.”

Angus Robertson, the SNP leader at Westminster, who had branded the 8 per cent rise as “reckless and damaging”, described yesterday's U-turn as “a huge blow to the Chancellor's credibility”.

It is understood that the mistake was made because, although VAT is charged on the price of a product, duty is charged on the alcohol content.

The PBR's 8 per cent increase on beer, while leaving the price to the consumer broadly unchanged after the VAT cut, has incensed the pub and brewing sector. In a letter The Times on Thursday, leading figures from the British Beer & Pub Association (BBPA) express their dismay at “the Chancellor's extraordinary decision to exclude pubs from the benefits of his cut in VAT”. The signatories, who include Ralph Findlay, the chief executive of Marston's, and Ted Tuppen, the chief executive of Enterprise Inns, will join forces today to launch a Save the Pub campaign, aimed at the Government's “unfair and unjustified attack on British pubs” in recent years.

Pub bosses have expressed dismay that, although the reduction in VAT is a temporary measure that will be reversed in 2010, it appears that the additional rise in duty in the PBR will remain in force permanently.

The WSTA, the industry body for the wine and spirits industry, also poured cold water on the Treasury's assertion that wine prices would remain broadly similar after the application of VAT and duty changes. “Our figures show that the vast majority of wine buyers face paying more.”

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