A radical shake-up of the pound;450 million-a-year youth advice and guidance service is likely to cost up to pound;80 million in staff redundancies.
Around pound;150m has been earmarked for reforms in 2008, when the Connexions service for 13 to 19-year-olds will be split in two. But only about half the money will be spent on the new service. The rest will be spent on redundancies and reorganisation.
Latest proposals for the youth green paper, due to be published in two weeks, show that 60 per cent of the cash would go to Children's Trusts - dealing with young people at risk - and 40 per cent direct to schools and colleges.
The service has been accused of concentrating too much on struggling teenagers to meet government targets.
A new service would use teams of education welfare staff, youth workers and personal advisers.
Margaret Hodge, the children's minister, wants the service to avoid the territorial spats that occurred between careers officers and personal advisers when Connexions was created.
She told civil servants she wanted to "break down the professional silos" in the service.
Unison, the public-sector union representing 15,000 Connexions staff, was alarmed at the prospect of redundancies. A spokesman said: "This can only do damage to morale and hence to the performance of the service up to 2008."
Last month the service was praised for achieving a 14 per cent cut in the number of young people not in employment, education or training. The Treasury target was 10 per cent.