The company, whose chairman, Chris Haskins, supports the Labour Party, was accused by the Government of "bad management". Mr Haskins said the job cuts were caused by last year's privatisation of the milk supply.
The cuts are among the biggest recent job-loss announcements and follow 1,250 redundancies announced by Northern Foods last month.
The cuts will be spread across the company's 30,000 workforce, but the 6,000 workers in the dairy side of the operation are likely to bear the brunt.
Northern, which handlesabout one-quarter of Britain's milk deliveries, said the job losses would occur over the next two years. It did not say how many would be compulsory.
The news generated accusations about the cause of the cuts, which Northern said was the result of higher prices imposed by Britain's 29,000 farmers. Last year, the Milk Marketing Board, which monopolised milk supplies for 60 years, was replaced by Milk Marque. Critics said a regulated monopoly had given way to an unregulated monopoly, which had allowed Milk Marque to raises prices.
William Waldegrave,Minister of Agriculture, yesterday told Commons question time that deregulation had nothing to with job cuts. He accused Northern of "bidding up'' the market, by offering farmers a high price for milk, which could not be sold to consumers at a reasonable profit. Mr Waldegrave said: "Northern Foods were going round the farms, saying that whatever anyone else would pay for milk, they would pay 1.5p per litre more. I have great sympathy for those who have lost their jobs in Northern Foods, but I have limited sympathy for the management.''
Mr Haskins said: "Any member of this Government who blames someone for bad management is being a bit cheeky. The minister has no familiarity with the situation at Northern.''
A rival dairy company, Unigate, warned last year that de-regulation would add £40m to its costs and could lead to job cuts. The Dairy Trade Federation believes deregulation will cost the industry £300m and lead to 70,000 job losses.
A fall deliveries of milk to the doorstep, as supermarkets capture more of the market, had been a factor in the job cuts, but deregulation had caused more pain; it had "put an unbearable squeeze on our business and in turn, jobs,'' Mr Haskins said.
Last year's fall in Northern's profits, down from £72m to £53m, was the first since the company was floated on the Stock Exchange in 1956.
The doorstep share of the UK milk market has fallen from 62 per cent in 1990 to 45 per cent today and is forecast to fall to about 30 per cent by 1997. It cost Northern Foods £45m a year more to buy from Milk Marque. The cost of a doorstep pint is now more than one-third more than a supermarket pint in some areas. In the North, customers pay about 36p for a doorstep pint compared with about 40p in London. Many supermarkets offer a four- pint container for about 85p
Comment, page 19
Industry shake-up, page 32