A MEMBER of Wendy Alexander's shadow cabinet has criticised the Labour government for increasing the duty on whisky.

Iain Gray, Labour's finance spokesman at Holyrood, told a private business audience he did not agree with the tax hike.

He said he would have preferred a freeze, but denied using the phrase "bombshell" to describe the policy.

The Scottish Labour split follows chancellor Alistair Darling's decision to increase duty on spirits in last week's Budget. Distillers and opposition politicians criticised a move they said would add at least 59p to a bottle of whisky.

Darling defended the increase saying it was required to pay for social justice measures.

"I think the Scotch whisky industry is very important to Scotland. What is also important to Scotland is making sure that we get children out of poverty, that we help elderly people," he said.

However, it has since emerged that Gray has joined the growing list of critics of the hike. At a CBI business breakfast in Glasgow on Thursday, he was said to have criticised the decision.

Two attendees told the Sunday Herald that Gray, who used to work for Darling as a special adviser, told his audience he would have advised against a rise had he still been working for the Labour MP.

One of the observers claimed he heard Gray describe the tax increase as a "bombshell" for the industry, a charge the MSP denies.

Gray said of his comments: "I hoped it would be frozen but understood why, after 10 years of a freeze, it should be done. An increase was expected, although it might have been a bit higher than expected."

An SNP spokesman said: "Alistair Darling's smash-and-grab raid on Scotch whisky represents the biggest tax hike on the industry for a generation. Along with oil, whisky is clearly filling the black hole in Darling's Budget.

"These comments from Gray show Labour are split from north to south on this issue."