The most senior and long-serving civil servants could be offered a maximum of £95,000 to quit their jobs as part of a government efficiency drive.

Sky News reported last week that several government departments had started voluntary exit schemes for staff in a bid to make savings, including the Department for Environment and Rural Affairs, the Foreign Office and the Cabinet Office.

The Department for Health and Social Care and the Ministry of Housing and Local Government have yet to start schemes but it is expected they will, with the former already set to lose staff following the abolition of NHS England that was announced earlier this month.

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Rachel Reeves, the chancellor, confirmed in last week’s spring statement that the government was setting aside £150m to fund the voluntary exit schemes, which differ from voluntary redundancy in that they offer departments more flexibility around the terms offered to departing staff.

Ms Reeves said the funding would enable departments to reduce staffing numbers over the next two years, creating “significant savings” on staff employment costs.

A maximum limit for departing staff is usually set at one month per year of service capped at 21 months of pay or £95,000.

Whitehall sources stressed the figure was “very much the maximum that could be offered” given that the average civil service salary is just over £30,000 per year.

Whitehall departments will need to bid for the money provided at the spring statement and match the £150m from their own budgets, bringing the total funding to £300m.

The Cabinet Office is understood to be targeting 400 employees in a scheme that was announced last year and will continue to run over this year.

A spokesman said each application to the scheme would be examined on a case-by-case basis to ensure “we retain critical skills and experience”.

It is up to each government department to decide how they operate their scheme.

The voluntary exit schemes form part of the government’s ambition to reduce bureaucracy and make the state more efficient amid a gloomy economic backdrop.

Ahead of the spring statement, Ms Reeves announced plans to cut civil service running costs by 15% by 2030, which ministers have said will save £2.2bn.

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The move could result in 10,000 civil service jobs being axed after numbers ballooned during the pandemic.

Ms Reeves hopes the cuts, which she said will be to “back office jobs” rather than frontline services, but civil service unions have raised concerns that government departments will inevitably lose skilled and experienced staff.

The cuts form part of a wider government agenda to streamline the civil service and the size of the British state, which Sir Keir Starmer criticised as “weaker than it has ever been”.

During the same speech, he announced that NHS England, the administrative body that runs the NHS, would also be scrapped to eliminate duplication and cut costs.

Sir Keir Starmer has said US-UK trade talks are “well advanced” ahead of tariffs expected to be imposed by Donald Trump on the UK this week – but rejected a “knee-jerk” response.

Speaking to Sky News political editor Beth Rigby, the prime minister said the UK is “working hard on an economic deal” with the US and said “rapid progress” has been made on it ahead of tariffs expected to be imposed on Wednesday.

But, he admitted: “Look, the likelihood is there will be tariffs. Nobody welcomes that, nobody wants a trade war.

“But I have to act in the national interest and that means all options have to remain on the table.”

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Sir Keir added: “We are discussing economic deals. We’re well advanced.

“These would normally take months or years, and in a matter of weeks, we’ve got well advanced in those discussions, so I think that a calm approach, a collected approach, not a knee-jerk approach, is what’s needed in the best interests of our country.”

Downing Street said on Monday the UK is expecting to be hit by new US tariffs on Wednesday – branded “liberation day” by the US president – as a deal to exempt British goods would not be reached in time.

A 25% levy on car and car parts had already been announced but the new tariffs are expected to cover all exports to the US.

Jonathan Reynolds, the business and trade secretary, earlier told Sky News he is “hopeful” the tariffs can be reversed soon.

But he warned: “The longer we don’t have a potential resolution, the more we will have to consider our own position in relation to [tariffs], precluding retaliatory tariffs.”

He added the government was taking a “calm-headed” approach in the hope a deal can be agreed but said it is only “reasonable” retaliatory tariffs are an option, echoing Sir Keir’s sentiments over the weekend.

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Tariff announcement on Wednesday

Mr Trump has been threatening tariffs – import taxes – on countries with the biggest trade imbalances with the US.

However, over the weekend, he suggested the tariffs would hit all countries, but did not name them or reveal which industries would be targeted.

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Mr Trump will unveil his tariff plan on Wednesday afternoon at the first Rose Garden news conference of his second term, the White House press secretary said.

“Wednesday, it will be Liberation Day in America, as President Trump has so proudly dubbed it,” Karoline Leavitt said.

“The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decades. He’s doing this in the best interest of the American worker.”

Tariffs would cut UK economy by 1%

UK government forecaster the Office for Budget Responsibility (OBR) said a 20 percentage point increase in tariffs on UK goods and services would cut the size of the British economy by 1% and force tax rises this autumn.

Global markets remained flat or down on Monday in anticipation of the tariffs, with the FTSE 100 stock exchange trading about 1.3% lower on Monday, closing with a 0.9% loss.

On Wall Street, the S&P 500 rose 0.6% after a volatile day which saw it down as much as 1.7% in the morning.

However, the FTSE 100 is expected to open about 0.4% higher on Tuesday, while Asian markets also steadied, with Tokyo’s Nikkei 225 broadly unchanged after a 4% slump yesterday.

Several private schools, as well as some pupils and their parents, have launched a legal challenge over the government imposing VAT on private schools.

The claimants, which include children and families at faith schools and families who have sent their children with special educational needs (SEN) to private school, are taking the legal action against the Treasury.

They claim the policy of applying VAT to fees is discriminatory and a breach of human rights law.

The Treasury is defending the challenges, with HMRC and the Department for Education (DfE) also taking part.

Dozens of supporters of the challenge appeared at the High Court in London for the first day of the hearing on Tuesday.

Lord David Pannick KC, representing one group of children and their parents, said that for some children currently in private schools, their needs are not met by state schools in their area, or at all, but the new law applies “irrespective” of a family’s need.

“The application of the law does have a damaging effect on individual children and their families,” he added.

As well as religious beliefs and SEN, the High Court was told some children are privately educated because of a need for a single-sex environment because of previous abuse, or because they are only temporarily in the UK and need to be educated in line with their home national curriculum.

Jeremy Hyam KC, representing two children with SEN in private schools, told the court that at least 35,000 children could be displaced from private schools and into state institutions because of increased costs.

He continued in written submissions: “That displacement will have a particularly prejudicial impact for displaced SEN children compared with those entering the state sector who do not have SEN.”

He said that provision for SEN pupils in the state system “is in crisis” and that the transition “is likely to have a highly detrimental effect” on pupils who have to move schools.

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Bruno Quintavalle, representing four small Christian schools and parents who have sent their children to them, said the “ill thought-out proposal introduced in haste” placed parents in “impossible positions”.

He said in written submissions: “The small independent schools that are likely to suffer most from this are those that serve minority religious communities.”

He continued: “The claimant parents are not prepared to send their children to state schools, because the secular education provided by the state sector would oblige the children to be educated in a way contrary to the parents’ religious convictions or would otherwise expose their children to risks which they cannot in conscience assume.”

But Sir James Eadie KC, representing the Treasury, HMRC and the DfE, said abolishing the VAT exemption for private school fees was a prominent feature of Labour’s manifesto at the last general election and is expected to yield between £1.5bn and £1.7bn per year.

He continued in written submissions: “Parents wishing to opt out of the system of universally accessible state-funded education are free to choose any private education for their child that they can afford, or to educate their child at home.

“The fact that measures of general application, such as taxes, minimum wage laws, national insurance, etc, affect the cost of providing such a service, and therefore its purchase price, does not make those measures an interference with freedom to offer or receive private education.”

The hearing before Dame Victoria Sharp, Lord Justice Newey and Mr Justice Chamberlain is due to conclude on Thursday.

A decision is expected in writing at a later date.