The eye-watering demand was sent to cabinet colleagues as ministers stepped up emergency cost-cutting across the public sector. But Labour claimed the threat of 40 per cent reductions was being used to scare the public into accepting less steep cuts.
HOW I SEE IT - Graham McMillan, CEO, Open Road
The coalition is up against it on cuts to public spending. On the one hand, it needs to send the message to Whitehall departments that they need to prepare for the worst.
It also wants departments to give the Treasury options so it can stick its nose in and make some choices, rather than just accepting what the departments offer up. This is why cuts of up to 40 per cent are on the table.
On the other hand, Nick Clegg and David Cameron do not want to scare the public too much. The coalition leaders do not want there to be an impression that it will simply be impossible to deliver cuts on this scale - which explains why one member of the Government said this weekend that cuts would not be as big as 40 per cent.
Unfortunately, it has not quite managed either.