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The Army is now 5,350 short of its manpower targets and unless recruitment is boosted could be 20,000 men under strength by the turn of the century. The Royal Navy is also suffering from similar problems and has introduced "stay-on" bonuses of up to £3,000 a person to meet a shortage of hundreds of mechanics.

Nicholas Soames, Armed Forces minister, told Parliament that the Army's shortfall of recruits had risen by 34 per cent in the four months since June and was expected to reach 7,000 by May. That would bring the Army strength close to the psychologically sensitive 100,000 figure below which it has never dropped, with the prospect of falling to around 88,000 by the year 2000.

Lt Gen Sir Michael Rose, the former UN commander in Bosnia who as adjutant-general is in charge of Army recruitment, is known to be furious at the effect of Government cuts. He was particularly incensed at the decision to close the Army's 126 recruitment offices and to end "boy service", the apprentice and junior leaders schools which produced a third of the Army's recruits.

His opposition has saved many of the recruitment offices and ministers are considering his proposal to re-instate the junior leaders system, which was used to groom young soldiers as non-commissioned officers. It took promising 16-year-olds from school and put them on leadership courses with the aim of producing future senior NCOs and Regimental Sergeant-Majors.

As they were earmarked for early promotion, they tended to remain longer in the Army, thus saving money and reducing recruitment needs. The increased amalgamation of regiments has also caused major problems cutting back on local identification with regional units. Shortages are particularly severe in the Parachute Regiment, Royal Artillery and the Royal Armoured Corps.

Senior commanders believe that drastic measures are needed to increase recruiting as reductions under the Options for Change and Front Line First reviews were too swingeing.

Commanding officers are to be given increased budgets to allow them to recruit locally. The Royal Navy, which is being slashed from 63,000 in 1990 to 45,000, is facing its manpower crisis on a smaller scale. Attempts to boost recruiting in the Royal Marines have been partially successful but Marine Engineering Mechanics are being offered £3,000 to stay on.

David Clark, opposition defence spokesman, said the shortfall showed the extent to which morale within the Armed Forces had plummeted and demanded urgent action to bring them back up to strength.

"In spite of desperate efforts to recruit, the Government has so lowered Army morale that they are 5,350 troops short. There is no sign of improvement," he said.