Ministry of Defence to cut further 3,000 civilian jobs

Another 3,000 civilians are to be axed from the Ministry of Defence to help it bring down an estimated 2bn overspend in its budget, the guardian has learned.

Philip Hammond will be forced to make the embarrassing admission in the coming days amid fresh concern within the MoD about how to balance its budget.

This anxiety has led the defence secretary to order the army, Royal Navy and RAF to go through all their key contracts and equipment programmes to ensure they are in line with their targets.

According to sources, the department still has a £2bn-3bn overspend and ministers fear this figure will rise, not fall, unless further action is taken.

The admission over the number of civilian job losses - which may have come from miscalculations in the money for civilians - is likely to put the department under even more strain, and force a rethink about where redundancies will come from.

The strategic defence and security review (SDSR) included a pledge to axe 25,000 civilian jobs from the MoD before 2015.

This is the baseline figure that the department and the unions have been working with since September 2010.

That has now been revised to 28,000. It is understood MoD finance officials have realised that the money set aside for civilians in the SDSR won't be enough to support the workforce they wanted – so more redundancies are needed.

In addition, the MoD will lose another 7,000 civilian posts between 2015 and 2020. It means the department's civilian workforce will have been cut from 75,000 to 40,000 within nine years.

Union leaders have asked for an immediate meeting with Hammond to explain the discrepancy, and are demanding to know why civilians are paying for the mistake.

They suspect the department lost track of how many people it employed at the time of the SDSR, which might have contributed to the accounting errors.

Steve Jary, national secretary of the Prospect union, said: "The truth is that cuts to civilian specialists in the department far outnumber cuts to the armed forces. Over 10,000 civilians left the MoD last year and it plans to cut another 10,000 in 2012. The department is already struggling to cope with its day-to-day business, and come the summer, will face a moment of truth. This is a disaster waiting to happen."

He added: "It just doesn't make sense. The armed forces needs both the skills and specialisms of those in the civil service coupled with the military capacity provided by our soldiers."

Though civil service cuts are considered more palatable politically, unions have warned the loss of core skills has already forced the department to buy in consultants on expensive, short-term contracts.

In December, the Guardian revealed that the department had spent nearly £600m over two years hiring outside consultants because it did not have enough in-house expertise.

A confidential internal report on the spending highlighted numerous flaws and rule-breaking, and warned that control of the MoD purse appeared to be "poorly developed or non-existent".

Earlier this week the MoD was strongly criticised by MPs on the defence select committee who said it was "grotesque" that the armed forces were being subjected to compulsory redundancies while no civil servants have yet been asked to leave against their will.

The committee dismissed explanations given by ministers and senior officials, describing the different treatment meted out to military personnel and civil servants as shocking.

The MoD defended the position, saying: "Reductions to the civilian workforce have had to be made to help tackle the financial black hole the government inherited in the MoD. Civilians receive considerably less in compensation than the average soldier; where a sergeant receives an average payoff of around £65,000, a civilian receives around £30,000 on average. The MoD civilian workforce is reducing by around 33% compared to a reduction of 17.5% in military manpower."

The MoD said the extra 3,000 civilian cuts were part of the annual planning round.

"Each year, we review our plans to take account of changes over the previous 12 months and to ensure that we have the right equipment and manning levels to meet the future needs of our armed forces as agreed in the Strategic Defence and Security Review. Final decisions have yet to be taken but this annual process rightly considers the status of all our key programmes to ensure the continued coherence and balance of the whole programme."