Lord Mandelson said universities were not being singled out for cuts
A fresh spending row has erupted between Labour and the Tories after Lord Mandelson appeared to suggest the government would start cuts this year.
The Tories say he has "blown apart" Gordon Brown's claim the recovery is too fragile to begin tackling the UK's £178bn budget deficit until next year.
But the business secretary's office said he had been talking about the overall climate of spending restraint.
Spending would still rise in 2010-11 while the recovery is secured, it said.
In a speech to an audience of education experts earlier, Lord Mandelson said universities - which have had their 2010-11 budget cut by £449m - were not being singled out for cuts and that "much of the rest of the public sector will face similar constraints this year or soon after.
"I have always said that higher education would have to bear its share of public spending cuts, but not more."
His comments were seized on by shadow Treasury chief secretary Philip Hammond, who said they showed that it was possible to start cutting the deficit this year, as the Tories have promised to do.
"Peter Mandelson has blown apart Gordon Brown's claim that spending cuts this year would undermine the recovery," he said.
"His intervention reinforces the view of the Governor of the Bank of England, the CBI, the Institute for Fiscal Studies, and credit rating agencies that an early start to cutting the deficit is essential to support the economic recovery.
"People will be asking who speaks for the government now - Peter Mandelson or Gordon Brown?"
But his comments were dismissed by Lord Mandelson's spokesman, who said the government's position remained unchanged.
"The Tories are in no position to talk about policy confusion given the chopping and changing we have seen from them over the past few weeks," the spokesman said.
"Our policy is clear and consistent, as set out by the Chancellor in the Pre-Budget Report, public spending will rise in 2010-11 to support the economy until recovery is secured."
Chancellor Alistair Darling also warned an age of "low growth and austerity" if the Conservatives win power at the next election, expected in May.
Mr Darling said he had faced the "hardest decisions" of his political life during the financial crisis, while Conservative leader David Cameron and shadow chancellor George Osborne had in his view shown "little evidence" of either experience or judgment.
The timing of the cuts needed to get Britain's record deficit under control has become a key battleground in the run-up to the general election.