Chancellor Alistair Darling is to change his plan for a duty increase on Scotch whisky after protests from the industry, it was revealed today.
He is expected to table official papers later today which will reduce the planned 8 per cent rise in excise duty.
Whisky producers complained that the increase, even combined with a 2.5 per cent cut in VAT, would put 29p on the price of a bottle of whisky.
The order enshrining the 8 per cent rise was published on Monday - and it noted that "no impact on the private or public sectors is foreseen".
But sources confirmed Mr Darling will today lay a further order which will ensure that the tax paid on a bottle will remain "broadly" unchanged.
The move was described as a "tweak" rather than a climbdown.
A Treasury spokesman said: "As the Chancellor has said, what he intends is to ensure that broadly what people pay in tax on whisky, or any other alcohol, is the same next week as it was last week."
The move was welcomed by the industry.
Campbell Evans, of the Scotch Whisky Association, told BBC Radio Scotland: "I am delighted that this appears to be revisited.
"I'm sure this is an error that crept in and the Government is taking quick steps to address that and the industry will welcome that very much."
The industry has been particularly critical as the rise would have been the second this year.
After Mr Darling's Pre-Budget Report on Monday, the association said: "There is no logic to any duty increase.
"Alcohol revenues have already fallen by £40 million this year on the back of the 9 per cent excise rise in March."
In broadcast interviews yesterday, Mr Darling insisted his aim was to keep alcohol taxation "broadly" the same but, while VAT was charged on price, duty was charged on alcohol content so there was not an exact match.
SNP MP Angus Robertson, whose Moray constituency is a major whisky-producing area, said: "We need to see the detail of what Alistair Darling is proposing but hopefully he is U-turning on this damaging tax hike on one of Scotland's key industries.
"It would be a huge blow to the Chancellor's credibility if he is forced into a climbdown when the ink on the Pre-Budget Report is barely dry, and it suggests that he didn't understand the impact of his own PBR measures on Scotland."
The British Beer and Pub Association contacted the Treasury to demand "fair treatment" for beer following the announcement that the duty increase on whisky is to be reduced.
Any tax changes announced for whisky and spirits should apply to the whole alcohol sector, said the Association.
It rejected Mr Darling's claim that alcohol duty increases would merely offset the temporary reduction in VAT, insisting that they will in fact result in price increases, with beer suffering the second highest overall tax rise in off-licences.
During an emergency House of Commons debate on the Pre-Budget Report, Mr Darling confirmed the duty changes to MPs.
He said: "I said on Monday that what I wanted to do was to make sure that the level of taxation on alcohol and on cigarettes remained the same so that broadly the reduction in VAT would be cancelled out by the change in duty.
"I think in relation to spirits, what we announced on Monday didn't actually achieve that.
"So I am tabling a further order today to ensure that spirits, the duty there, is at a slightly lower rate, which I think will hugely benefit the spirits industry wherever it is."