Career officers believe frontline services will be damaged and insiders say the cutbacks could mean the effective end of local Connexions services.
Anne Weinstock, director of the DfES's supporting children and young people group, has told the chief executives of England's 47 local Connexions partnerships to find pound;25m in savings for 200405.
In a letter seen by The TES she says that the group, formerly the Careers Service National Unit, has already reduced its head office programmes by nearly pound;10m and, in a separate exercise, reduced its running costs by 30 per cent.
A Connexions partnership board member said chief executives were in an "absolute rage" and "spitting blood" at the news which they had been asked to keep quiet.
It came as the country's careers service was criticised by both the Tomlinson inquiry and the Organisation for Economic Co-operation and Development.
Ms Weinstock's letter proposes that the Connexions partnerships try to avoid disrupting front-line services by finding the money by reducing their VAT liability and becoming more "tax efficient".
But the board member said they were facing cuts in 200405 anyway - their overall funding was set to increase by just 1.6 per cent to pound;446m - and the group had already underestimated the money they would need for VAT.
For some partnerships the new savings they were being asked to make would amount to more than their entire central budget.
The only way they could avoid frontline services being hit would be to have local councils, which operate under different VAT rules, receive their grants. That would mean effectively disbanding the Connexions partnerships.
Chris Evans, president of the Institute of Career Guidance representing more than 3,500 careers advisers, said any cuts would have a negative impact on careers advice.
A DfES spokeswoman said the changes should not effect front line services providing the partnerships made sure they were "tax efficient".
In this week's report into the future of secondary qualifications Mike Tomlinson noted a perception that careers advice was not yet of a consistently high quality and often formed a targeted service rather than a universal entitlement.
An OECD report on careers guidance given to young people in the UK and 13 other countries found that training for advisers was often inadequate and inappropriate.
Guidance within UK schools was also too variable in quantity and quality with pupils sometimes being advised to stay on, even if it was against their own interests, because it would improve the school's financial position.
Meanwhile, a study by Manchester Metropolitan University and the Learning and Skills Development Agency found pupils were more likely to rely on advice of friends rather than careers advisers, teachers or parents when choosing a university.