A U-turn by the UK government on this week's alcohol duty increase has split the spirits and wine industries in the country.

On Tuesday (25 November), the Chancellor of the Exchequer, Alistair Darling, announced an 8% rise in the duty on alcohol in the UK, to match a reduction in value added tax (VAT) from 17.5% to 15%. The move was met with widespread condemnation within the industry, with the Scotch Whisky Association warning that the rise will add another GBP0.29 (US$0.44) on to a standard bottle of Scotch in the UK, following a GBP0.59 tax increase announced in March.

Yesterday (26 November), however, Mr Darling reduced the rise to 4% on spirits and spirits-based RTDs, having recognised that the 8% duty rise would have resulted unintentionally in a price increase.

On the basis of the revised figures, taking into account the temporary cut in VAT, the duty on Scotch whisky will remain broadly unchanged, the Scotch Whisky Association (SWA) noted today.

"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," the SWA said.

The increase on duty on all other alcohol, however, remained at 8%.

"While welcoming the Government's decision to scale back planned tax changes for spirits, the U-turn inexplicably leaves the wine sector shouldering the burden of higher prices," the UK Wine & Spirit Trade Association (WSTA) said.

The WSTA cited figures showing that the majority of wine buyers would face paying more, with prices for the 92% of wines sold under GBP6 (US$9.26) in the UK off-trade set to increase.

"We welcome the admission that the tax change was wrong because it meant consumers paying more, but if that's true for spirits it's also true for wine," said the WSTA's chief executive, Jeremy Beadles.

"It is baffling that the Government should think that what's right for spirits is wrong for wine."