At least 70 top civil servants at the Department for Education and Employment face compulsory redundancy as part of sweeping cuts planned within the newly-merged department.
Several hundred more senior officials at Sanctuary Buildings and Caxton House, former headquarters of the Department of Employment, are also expected to take voluntary redundancy in the wake of the merger, announced in the Cabinet reshuffle in July.
Another consequence of the merger is that one of the two permanent secretaries who have been in joint charge - Sir Tim Lankester and Michael Bichard - will either go or be moved to another department. Other jobs under threat as "superfluous to requirements" include assistant and under-secretary posts as well as one of the five top-tier positions which were created by the merger.
Controversially, the redundancies could be cushioned by payments of up to Pounds 300,000 plus deferred pension rights.
The new department is in turmoil and morale said to be at rock bottom with staff having to reapply for their jobs. News of the job losses will increase speculation that last week's damaging leak of a briefing paper prepared for Gillian Shephard, the Education and Employment Secretary, emanated from a disgruntled civil servant.
One source close to the department said: "They are all quite fond of Mrs Shephard, but morale is terrible and they are very worried about their jobs."
Redundancy packages being negotiated by DFEE officials are believed to mean an under-secretary, aged between 40 and 48, could be offered a severance deal worth Pounds 315,000 of which the first Pounds 30,000 would be tax free, plus a generous deferred pension. Whitehall departments now have considerable discretion over leaving packages and it is understood that the DFEE is prepared to be generous.
HM inspectors who were made redundant or took early retirement when the Office for Standards in Education was set up three years ago also received large pay-offs.
In addition to the DFEE review, two major inquiries into civil servant numbers across Whitehall are under way. One of them, the senior management review, which will identify redundancies among top managers across all departments, is due to be published next week.
The large cost of redundancy payments for civil servants is likely to be unpopular with many parents, governors and teachers currently battling for more money to stave off further job losses in schools and colleges. Governors say 4,500 teaching jobs have been axed as a result of the Government's decision not to fund fully this year's teachers' pay award.
An estimated Pounds 500 million was cut from education budgets this year and leaders of parents, governors, and the teacher trade unions are now seeking a joint meeting with Mrs Shephard over funding.
Larkmead school in Abingdon, Oxfordshire, is sending classes of 12 and 13-year-olds home early because of the budget crisis.
The redundancy package offered to civil servants contrasts with that of a male teacher taking early retirement in 199394: an average salary of Pounds 25,256 resulted in a pension of Pounds 8,957 and a lump sum of Pounds 26,820. A woman in similar circumstances on a Pounds 21,836 salary received a pension of Pounds 6,630 plus a lump sum of Pounds 19,861.
Nigel de Gruchy, general secretary of the National Association of the Schoolmasters Union of Women Teachers, said: "If they offered teachers Pounds 300,000 to go there wouldn't be anyone left."