The plan set out in a leaked memo written by the Defence Secretary John Reid, hints that the Government is keen to cut the heavy cost of patrolling southern Iraq.
The memo calculates that the current cost of the British presence in Iraq, around £1bn a year, could be halved if the number of troops were reduced to 3,000 during 2006. The memo implies that the British would formally hand over control to the Iraqis of the four provinces currently under British control by April 2006, but that it take another eight months before what the memo calls the "UK military drawdown" has been completed - and 18 months before the money comes through.
Revealingly, it hints at tension between the Pentagon and US Central Command, which want a rapid troop reduction, and commanders on the ground in Iraq.
The memo also warns that Japan may insist on pulling out the 550 Japanese engineers if they left with the only the Iraq army to protect them from insurgents. There will be a question mark, too, over the 1,400 Australian soldiers in Iraq.
The memo, entitled Options for future UK force posture in Iraq and headed "Secret - UK eyes only", was leaked to The Mail on Sunday, apparently by someone connected with the Defence department who suspected that Britain was preparing to get out quick as an economy measure, leaving the Iraqis to fend for themselves.
The defence department said it that various options were being considered for reducing the British presence in Iraq, and stressed that nothing has been finally decided.
The memo, sent to Tony Blair, said that the US government is also trying to scale down its military commitment to Iraq. "Emerging US plans assume 14 out of 18 provinces could be handed over to Iraqi control by early 2006, allowing a reduction from 176,000 (allied troops) down to 66,000.
"There is, however, a debate a debate between the Pentagon/ Centcom, who favour a relatively bold reduction in force numbers, and the multinational force in Iraq, whose approach is more cautious."
Mr Reid added that the British have a "commitment" to hand over two of the four provinces under British control, Al Muthanna and Maysan in October 2005, and the other two, Dhi Qar and Basra, in April 2006. This in turn should lead to a reduction in the total level of UK commitment in Iraq to around 3,000 personnel, ie, small scale," he added, "and an estimated halving in costs of around £1bn per annum currently. Though it is not clear exactly when this reduction might manifest itself, it would not be before around the end of 2006."
"We will need to consider handling of other allies. The Japanese reconstruction battalion will be reluctant to stay if force protection is solely provided by the Iraqis. The Australian position may also be uncertain."
The newspaper says some British Army chiefs say the minister has not choice but to recall 3,000 soldiers in October since Britain is committed to sending an extra 3,000 personnel to Afghanistan to replace US troops.
The British government's official view is that its troops will stay in Iraq until the local security forces are able to maintain control.
The ministry has confirmed that the document is genuine. In a statement yesterday, Mr Reid said: "We have made it absolutely plain that we will stay in Iraq for as long as is needed.
"No decisions on the future force posture of UK forces have been taken. But we have always said that it is our intention to hand over the lead in fighting terrorists to Iraqi Security Forces as their capability increases. We therefore continually produce papers outlining possible options and contingencies.
"This is but one of a number of such papers produced over recent months covering various scenarios. This is prudent planning. I stress again that no decisions on the future force posture of UK forces have been taken."