Diageo chief executive Paul Walsh has urged the government to be wary of the “unintended consequences” of any future increases in duty on alcohol.

Walsh said any big rises in the UK would make it very difficult to persuade countries such as India to reduce their punitive taxes on imported alcohol.

He was speaking after the mix-up in last week’s pre-budget report which saw duty on whisky initially increased before the government changed its mind.

Alistair Darling, the chancellor, raised the tax on Scotch whisky by 8%, which would have led to a 29p rise in the price of a bottle, but his proposals to offset the 2.5% cut in Vat by raising duty on spirits met a storm of protest.

He said his intention had been to keep prices the same, but after the Scotch whisky industry reacted angrily, he admitted his mistake in the House of Commons and has opted for a 4% increase in duty.

Walsh said he accepted that the chancellor had not intended to harm the industry. “I prefer to call it a correction, rather than a U-turn,” he said. “The chancellor admitted it was a mistake.”

But Walsh, who is also chairman of the Scotch Whisky Association, warned against any return to increasing the tax on alcohol, especially as the government seeks to rebalance the books when the economy returns to growth.

“I think that would be a mistake for a number of reasons,” he said. “We are working hard in places like India to get them to reduce their taxes and I think we are making progress. India is hugely important market and could be one of the biggest in the world but at the moment, the taxes are too high.

“It would make our job more difficult to argue that case if our own government was significantly increasing taxes.

“They [the government] have to be aware of the unintended consequences of their actions. The Scotch whisky industry is worth a lot of money to Scotland, something like £100 a second in terms of export revenues, and it would be wrong to place that at risk.”

Diageo employs 4,500 people in Scotland and recently invested £3m in two new distilleries. It expects to start distillation at its Roseisle distillery on Speyside, between Elgin and Kilross, in spring.

Walsh admitted the year ahead for Diageo would be difficult but described it as being “tough but not horrible”.

He said he remained optimistic about the prospects for growth in the longer term. In terms of Scotch whisky, he predicted there would be a growth “in value but not volume”.

Diageo, like other spirits companies, has been trying, with some success, to return whisky to the premium end of the market, although efforts have been undermined by supermarket price cuts.

“I’m not convinced the kind of people who buy [Diageo’s] Johnnie Walker Blue Label, or even Black Label for that matter, are going to stop buying because of an economic downturn,” said Walsh. “Super-premium spirits are still growing very fast, although not quite as fast as last year.”

Walsh admitted that he expected a slight dip in the growth rate of the company’s products in the UK, but that huge swathes of its global market will be completely unaffected by the economic slump.

“The UK is a small but important part of of our business. Africa, Latin America and and even China are still growing,” he said. “China’s economic growth has slowed but it is still something like 7%.”

Walsh said Diageo had not felt any impact from the takeover of Scottish & Newcastle by Heineken and Carlsberg in April.

He also said that, despite the downturn, his firm would be keeping an eye open for opportunities during the coming year.

However, despite recent reports suggesting Diageo is looking to buy a stake in Vijay Mallya’s United Spirits business in India, it is thought that a deal is unlikely in the short term.

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