Lord Mandelson has said Tory tax plans have been "thrown into confusion" by shadow business secretary Ken Clarke.
Mr Clarke told the BBC the Tories' main economic goals would be to cut public debt and restore growth rather than cut inheritance tax on homes under £1m.
Later, a Conservative spokesman said the party was still committed to its manifesto pledge to cut the tax.
The Tories' pledge in 2007 to cut inheritance tax was seen as a key point in reviving party fortunes.
It amuse me to see Mandelson making points at the expense of the man who was widely viewed as Cameron's response to the PM giving Lord Mandelson a cabinet position. It amuses me more that it undermines Cameron and Osbourne than because it attacks Clarke. I say that because in my opinion Clarke is one of the few decent Tories, he actually has a realistic view of the world and opposes idiotic ideas like raising the cap on inheritance tax. A move that would be very costly but mostly benfit the super rich; it is after all a tax only paid by 6% of people.
In hard financial times like this the government should be looking after the most vulnerable people in society and stiumlating economic growth in order to reduce unemployment, not give tax breaks to people with £1,000,000 houses.