In a letter to The Independent, David Blunkett, Secretary of State for Education and Employment, said the report was wrong, and John Prescott, the Deputy Prime Minister, told the Commons that the figures were "not consistent with the truth".
"The total increase for education in 1998-99 over 1997-98 is pounds 1.5bn," Mr Blunkett says. "The figures which [The Independent] quotes fail to include the pounds 2bn student debt sale."
But Don Foster, the Liberal Democrats' education spokesman, said: "The whole thing is smoke and mirrors, and it's about time the whole thing was exposed."
He said Mr Blunkett's own departmental report, published this week, revealed that the amount of money to be received this year from student loan debt sales would amount to pounds 1bn, and the report adds that "the Department surrenders receipts to the [Treasury] Consolidated Fund".
In Commons exchanges, Simon Hughes, the Liberal Democrat MP for Southwark North and Bermondsey, said: "Now that today's Treasury figures show that the Government will in the past year and in the coming year spend less of our national wealth on education than the Tories, isn't it clear that at local level, Labour does not deliver value for money, and at national level, they just don't deliver the money?"
Mr Prescott - standing in for Tony Blair - replied that in its first two years' spending plans, the Government had given more than pounds 2bn to education; much more than the Liberal Democrats promised at the last election, and "certainly more than was envisaged in the expenditure programme of the previous administration".
Letters, page 22