David Hunt, Secretary of State for Employment, was advised in a 'speaking note' for use at Cabinet, that ministers should take every opportunity to expose 'false accusations' about official figures by John Prescott, Labour's employment spokesman.
The memo, written by David Fenwick, deputy head of statistics at the Department of Employment, after a meeting with Mr Prescott earlier this month, said: 'The only people who 'fiddle' the unemployment figures are 'Do-It-Yourself' types who concoct them from different sources in order to arrive at the highest possible number.
'To say that there are 1 million 'hidden' unemployed is utter nonsense held only by a few lobbyists who are politically motivated.'
Mr Fenwick said the department's statisticians refuted Mr Prescott's assertion that they accepted that unemployment was half a million more than recorded in official data.
The memo added: 'Mr Prescott does not seem to be in a hurry to have a follow-up meeting with me. We should take every opportunity to expose his false accusations about our figures.'
Mr Prescott, who attended the meeting after an invitation from Mr Hunt, is attempting to draw up a different method of calculating employment which would not be based simply on the number of people claiming unemployment benefit and would be acceptable internationally. Labour would prefer to see data based more closely on standards laid down by the UN's International Labour Organisation.
Mr Prescott intends that a future Labour administration would publish the figure for unemployment used by the Conservative government, so that trends were discernible, plus the new calculation.
But Mr Fenwick's document also betrays a concern not reflected in ministerial speeches: 'It is too early to be confident (about unemployment), but the signs are encouraging. So far as other figures are concerned, employment continues to rise, but by less than we had hoped.'
Mr Fenwick counsels a 'robust approach' to those who point out that additional employment is largely concentrated among the self-employed and part-timers.
Mr Prescott, who received the memo from an anonymous source, said: 'It still appears from the tone of this document that there are still forces in the Government concerned about the manipulation of the figures rather than the honest recording of unemployment.' He said the note also showed the Government's sensitivity on the issue.
Last night Mr Prescott's office said that the object of the exercise was to obtain an accurate picture of the labour market, not to impugn the integrity of public servants. Labour's employment spokesman wanted to promote the concept that all those who would take a job if one was offered should be included in the jobless count, not just those who registered for benefit.
A comment in Mr Fenwick's document that Labour Force Survey figures, based on ILO assumptions, were now similar to the claimant count, was irrelevant, according to Mr Prescott's office. 'They are counting different people.'