WILLIAM WALDEGRAVE last night refused to withdraw a ''false

allegation'' that Lord Callaghan misled the Commons over devaluation

when he was Chancellor in 1967.

The Prime Minister, who was brought into the row, is expected to give

the former Labour Premier a similar message.

Lord Callaghan was furious that Mr Waldegrave appeared to have accused

him of lying to the Commons, and called on the Mr Major to order his

Minister to withdraw the allegation.

However, Mr Major, who has backed Mr Waldegrave throughout, is

continuing to stand by him, despite Lord Callaghan's plea that his name

should be cleared.

The row began when Mr Waldegrave, Minister with responsibility for

open government, told the Commons Treasury and Civil Service Select

Committee earlier this week that there were specific occasions when

Ministers could tell untruths to the Commons.

One such occasion was, he said, when the-then Mr Callaghan, as

Chancellor, was about to devalue the pound, but in the national interest

could not tell the Commons.

Lord Callaghan immediately called on Mr Waldegrave to clear his name,

telling him: ''You have allowed the impression to grow that my answers

were lies. They were not.

''Your replies have done me an injury that I dare say was unintended.

I now ask you to make clear publicly that it was not your intention to

allege that I lied to the Commons.''

There followed a flurry of letters in either direction.

Mr Waldegrave told him: ''I have at no point made any criticism of you

at all. Indeed, I have repeatedly referred to you as a statesman who did

his duty in the national interest. I certainly had no intention of doing

you any injury.''

The reply led Lord Callaghan to call on the Prime Minister to

intervene. He told Mr Major: ''I note that you said yesterday there is

no justification for being untruthful to Parliament. Clearly, you take

these matters seriously.

''So do I, and in these circumstances I am asking you to ensure that a

Minister who has made a false allegation of this kind should now

withdraw it.''

However, Lord Callaghan was disappointed. Almost by ''return of

post,'' Mr Waldegrave told him again that he would not withdraw.

Later, on BBC TV's Question Time programme last night, Mr Waldegrave

repeatedly refused to apologise.

Mr Waldegrave denied that he had accused Lord Callaghan of lying over

his answers on devaluation in 1967. ''Lord Callaghan was right to say

what he said but it is pushing it a bit to say that that is completely

true,'' he said. ''I do believe that anybody might have been misled by

that answer.

''I don't believe that is anything to apologise for either on his part

or mine. I am not impugning his honour in any way.

''He did the right thing by saying something then which wasn't

strictly in the logical sense quite true -- but it was still the right

thing to say in that extreme situation.''

The issue also was aired in the Commons yesterday.Mr Major told

questioners: ''It is not the case now, nor has it been the case in the

past, that ministers willingly mislead the House of Commons.''

Raising the issue with Mr Major, Mr John McFall, Labour MP for

Dumbarton, said: ''Now that the Minister of open government has given an

entirely new meaning to the phrase 'lying in state', would you agree

that the democratic process is undermined if ministers imply that the

concealing of truth from the House is acceptable?''

Mr McFall added: ''It is a lie that former Prime Minister Lord

Callaghan ever lied to this House, and will you therefore apologise to

that former distinguished Prime Minister for that slur?''

The Prime Minister retorted: ''The way you phrased your question is a

way you may regret on reflection.'' As Opposition MPs jeered, he added:

''If Labour MPs don't regret it, then I believe they should.''

Ian Bell