Department for Education is to have its budget cut by 3.4% in real terms, while its schools budget will be protected in real terms with a slight rise of 0.1%

Forty thousand teachers across England will lose their jobs as a result of today’s spending settlement, a confidential internal projection made by civil servants at the Department for Education predicts.

The Guardian has learned that the Department for Education is to have its budget cut by 3.4% in real terms, while its schools budget will be protected in real terms with a slight rise of 0.1%. In the last few days other Whitehall departments have had to find further savings in their budget to allow the government to say it is ringfencing schools.

They will also announce that the capital budget is to be cut by 60% – something widely expected after a summer in which the education secretary, Michael Gove, announced painful cutbacks to his portfolio by shelving the building schools for the future plan.

However, George Osborne will not make public tense discussions that have taken place within the department. The settlement means 70% of the youth budget, which includes youth clubs and after-schools activities, will be cut. But the most alarming figure is that the 40,000 teachers now find themselves in insecure positions.

The teaching budget looks likely to be hit despite the ring-fencing of the schools budget at 0.1%, because departmental sources believe schools will not see any dividend once the funds are funnelled through the complex schools funding system.

Discussions have taken place about encouraging schools to decide to become academies in a bid to retain staff – academies are not subject to national pay bargaining, and a head teacher leading a school unable to meet its teaching bill might be able to keep their staff if they moved to academy status.

Some consolation is expected later today in the form of the pupil premium secured by the deputy prime minister, Nick Clegg. It is expected that the government will announce this as additional funding to the education department.

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