The Treasury cuts were seen as an example to other departments to wield the axe against up to 100,000 of the total 500,000 civil servants over the next decade.
A report to Kenneth Clarke, the Chancellor, said it was 'bound to have knock-on effects through the rest of the organisation'.
Sir Terence Burns, permanent secretary at the Treasury, denied it was a blueprint but substantial cuts are being prepared by the Departments of Health and Transport and the Home Office. A White Paper by William Waldegrave in July foreshadowed a reduction in Civil Service posts.
The job losses at the Treasury are likely to include two of the nine Deputy Secretaries earning about pounds 75,000 a year, about seven of the 21 assistant secretaries earning pounds 55- pounds 60,000 and about 19 of the 66 senior civil servants earning about pounds 50,000.
The redundancies could fuel the controversy about Government 'sleaze'. City institutions are certain to offer jobs to high-flying civil servants, and the most high ranking could leave the Civil Service with redundancy payments of up to pounds 200,000, based on a maximum of three years' service for those under 50. Under Cabinet rules, they would have to obtain Government permission to take posts in the private sector.
The Treasury proposals drew warnings that the Government was in danger of politicising the Civil Service. Elizabeth Symons, general secretary of the First Division Association representing top civil servants, and Michael Meacher, the Labour spokesman on the Civil Service, said it went to 'the heart of government'.
It would create a climate of 'fear and insecurity' among civil servants - regarded as the best in the world - Mr Meacher said. 'The Civil Service does not belong to the Tory party. The nation deserves better than to let it be neutered as if it were Major's poodle.'
The report, drawn up by Sir Colin Southgate, is to be open to consultation, but Sir Terence made it clear he wanted implementation 'for the bulk of this by April next year'.
The cuts will remove layers from the top echelons of the Treasury civil service, which Sir Terence insisted would allow the Treasury to perform better. The report highlighted the need to spend more time and money on strategic analysis and long-term developments.
Andrew Tyrie, a former adviser to John Major and Lord Lawson, said: 'I don't think the Treasury needs such a fundamental reform. It has a couple of problems - introspection and short-termism. But I cannot see how such a large cut in staff will leave more time for strategic thinking. There should be greater scope for bringing in external expert advice on issues where the Treasury is weak.
'I think clearly the Treasury has been given an exemplary sentence. One measure of whether it will all be worthwhile is whether we will see the higher echelons of the Civil Service cut by 30 per cent elsewhere in Whitehall.'
Insiders also questioned whether the Treasury would remain strong enough to challenge the vested interests represented by departments, such as the defence industry by the Ministry of Defence, and the drugs industry by the Department of Health, in seeking to reduce public expenditure.
Sir Terence said some civil servants would be concerned 'to see a reduction in promotion prospects' within the current grading structure. But new pay and grading arrangements in 1996 should ensure staff who performed well would be 'fully rewarded'. Those in lower grades would 'seize and relish' their chance to take more responsibility.
The cuts could also herald the departure of the Treasury from its cavernous Victorian building in Whitehall. Sir Terence said a great deal of work was required on the building. The report says the Treasury staff needs to be brought together 'in one central London location in a building that has all the facilities one would expect for the 21st century'.
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