Deputy Prime Minister John Prescott has pointed to job losses being a likely part of any deal to solve the fire strike.

He told MPs that with 20% of firefighters due to retire within three years, this was an opportunity to create "a 21st Century service".

Firefighters numbers

Current strength: Around 55,000 Government expects 11,000 to retire within three years Deciding not to replace 4,000 of them would save �100m

Earlier his deputy Nick Raynsford told the BBC that job cuts would be needed as part of the creation of a leaner, smaller service, but that they hoped to avoid compulsory redundancies.

Fire Brigades' Union (FBU) leader Andy Gilchrist said the comments meant the "cat is out of the bag" and that the government's aim was fewer firefighters.

"Finally, a government spokesperson as high up as the deputy prime minister has admitted that this is about job losses," said Mr Gilchrist.

The government's own review showed more firefighters were needed, not less, he argued.

Meanwhile, the minister responsible for the fire service in Scotland has resigned after claims he described striking firefighters as "fascist bastards".

Extra money

Efforts are continuing to end the dispute with firefighters, with the current stoppage now in its fifth day.

The FBU - which voted for strike action after its demands for a 40% pay rise were dismissed - has always expressed concerns that the government wanted to cut jobs.

Ministers say they will not give extra money for pay rises above 4%.

Prescott: Need to "lift our eyes above the bile and recriminations"

Mr Prescott also urged all sides to move beyond the "recrimination and bile" of the dispute and come up with a pay settlement funded by reform of working practices.

The deputy prime minister insisted that the strike would do nothing to change the government's position on the pay claim.

The government is now publishing the principles it thinks should guide modernisation.

But Conservative spokesman David Davis said "chaos and confusion" at the heart of government had aggravated the fire dispute.

As Mr Davis called for clarity, Lib Dem spokesman Ed Davey also complained of mixed messages from ministers.

Less people

Officials for Mr Prescott have met representatives from the firefighters' local government employers to discuss how to fund any increase in pay.

Mr Raynsford, who will meet local employers on Wednesday, told BBC News: "There may well be a need for less people overall... but working in a more efficient way to ensure that cover to the public is maintained at the best possible level."

With many retirements due, he was "quite confident" that change could be done without redundancies.

Firefighters protested against Tony Blair as he visited north London

Leaked documents indicate the reforms wanted by the government will cost money in the short term, with changes such as overtime adding �18m onto the wage bill.

Union officials fear that with almost three-quarters of the 16% pay offer currently offered not being funded by government, extensive job losses will be needed.

They believe the �132m shortfall is equivalent to 5,280 firefighters.

Mr Raynsford also played down the possibility the government would offer "transitional funding" to local authority employers to help pay for the deal while cost savings kick in.

The governor of the Bank of England Sir Edward George agreed the firefighters' pay demands were unaffordable.

Speaking on Tuesday, he warned that a "double-digit" settlement could drive up inflation and risked triggering higher pay demands across the public and private sectors.

That echoed Prime Minister Tony Blair's warning on Monday that giving in to the FBU's pay claim would have "dire" economic consequences.

A baby was saved from a fire on Monday by the armed forces

Government modernisation demands include sharing control centres with other emergency services, reduced night cover and full and part-time firefighters working together.

National Officer of the FBU John McGhee, told BBC News on Tuesday that modernisation had been taking place over the last 25 years, but the changes expected by the government were not practical.

Fire control operators had particular skills for the job and full and part-time firefighters already worked together, said Mr McGhee.

He said reducing fire cover at night, when most of the fire deaths happen, posed a risk to the public.

Mr McGhee said the FBU had put forward a modernisation programme of its own.