The chancellor has admitted to MPs that he made a mistake in raising duty on Scotch whisky, which would have led to a 29p rise in the price of a bottle.
Alistair Darling caused an inadvertent storm with his proposals to offset the cut in VAT by raising duty on spirits.
His intention, he said, was to keep prices the same. The Scotch whisky industry reacted angrily.
Now the chancellor has admitted his mistake in the Commons and has tabled legal orders to negate the impact.
It is understood the original 8% increase in excise duty on spirits will be halved to 4%.
Mr Darling told the Commons: "I said on Monday that what I wanted to do was to make sure the level of taxation on alcohol and on cigarettes remained the same.
"So that broadly the reduction in VAT would be cancelled out by a change in duty.
"I think in relation to spirits what we announced on Monday didn't actually achieve that so I'm tabling a further order today to ensure that on spirits the duty there is at a slightly lower rate, which I think will hugely benefit the spirits industry wherever it is."
Reaction from Mr Darling's opponents was swift.
The SNP's Angus Robertson, whose Moray constituency produces more than half of Scotland's malt whisky, said: "I welcome the fact that the Treasury has buckled in the face of the outcry from the whisky industry and the SNP over the last 48 hours.
"It confirms just how much of an afterthought the whisky industry was to the chancellor that he took such a reckless decision in the first place.
"The decision to cut the increase by half is certainly welcome.
"The wheels are coming off the Pre-Budget report, and serve as a perfect illustration of why the Scottish Parliament should be responsible for all tax and spending decisions in Scotland."
For the Liberal Democrats, Alistair Carmichael said: "I am glad that Mr Darling has now ordered changes to Monday's PBR to prevent this vital industry being hit by yet more tax increases.
"This embarrassing u-turn is something which should have never been necessary.
"It beggars belief that the chancellor was so unaware of the impact his proposals would have on such a crucial Scottish industry."