Lord Mandelson accused shadow chancellor George Osborne of a "deliberate untruth" today as the bitter political row over Government spending plans continued to escalate.
Yesterday, Mr Osborne accused Prime Minister Gordon Brown of deliberately denying him access to information about the public finances which the Tories needed in order to prepare their own spending plans.
However, in a statement today, Business Secretary Lord Mandelson said Mr Osborne's claim had been rejected by Cabinet Secretary Sir Gus O'Donnell.
He challenged him to withdraw the charge before Tory leader David Cameron's weekly clash with Mr Brown at Prime Minister's Questions later today.
"There is a very unattractive pattern of behaviour that is starting to emerge with George Osborne, of innuendo in pursuit of a smear," Lord Mandelson said.
"Yesterday, George Osborne issued a very serious allegation that the Prime Minister had intervened to deny the opposition of information they were entitled to. This claim has been flatly denied by the Cabinet Secretary.
"I suggest George Osborne withdraws this deliberate untruth to avoid embarrassing his leader at Prime Minister's Questions today."
In a BBC interview yesterday, Mr Osborne said the Tories had been denied the chance to inspect a database detailing public expenditure in 12,000 key areas.
He said they had requested sight of the so-called Combined Online Information System at two formal meetings earlier this year, but were rejected both times.
"Gordon Brown is denying to the opposition the information on spending items in the government budget which would help us plan for government, help us plan for dealing with the debt crisis," he said.
"That makes our life as an opposition more difficult but, more to the point for the country, it means the country doesn't know the truth about where their money is going."
The latest flare-up follows weeks of rowing between Labour and the Conservatives about their respective plans for spending.
The Prime Minister has sought to portray the Tories as the party of cuts after shadow health secretary Andrew Lansley suggested they would have to reduce spending by 10%.
But Mr Osborne and Mr Cameron insist that Labour will also have to cut spending in order to bring down massive public debt racked up during the banking crisis and recession.
Ministers insist that real spending can increase after 2011.
The Prime Minister "knows nothing about this", his spokesman said.
"He has not been involved or made any decisions or had any discussion about what information the opposition parties have access to because that would be completely inappropriate," he told reporters.
Mr Brown recognised the need for the Opposition to have access to information, and had written to Mr Cameron to say so in December, but believed he should abide by "long-standing convention" that it was a matter entirely decided by civil servants.
"It is not for him to get into the specifics of what that means in practice; it would be completely inappropriate to do that."
The Prime Minister said Tory spending plans were based on unemployment continuing to rise "because you will do absolutely nothing about it". Mr Cameron retorted that it was Labour policies putting people out of work, adding: "There's only one person we want to put on the unemployment register and that's the Prime Minister.