The government plans to slash funding to green organisation Wrap in a move that has stunned retailers and suppliers as much as environmentalists.
Defra is to reduce the environmental body's budget by at least 25% next year, threatening jobs and a number of projects designed to reduce food packaging and waste.
Wrap has been warned by Defra to expect its funding stream to be cut from £73.6m to about £55m from April 2008, though the exact figure is still the subject of negotiations.
Wrap - Waste and Resources Action Programme - is one of a number of agencies to have its funding cut in a belt-tightening exercise by Defra.
The Treasury has told the department it must save between £130m and £270m, in the light of massive bills generated by bird flu, foot and mouth and bluetongue.
Food from Britain is another body to face cuts. But with the environment at the top of the political agenda, the decision to reduce Wrap's budget has raised eyebrows.
Established in 2000, it is aiming to reduce packaging waste by 60,000 tonnes a year by 2008 through projects with manufacturers and retailers.
"Tackling waste and climate change are clearly key priorities for the government, so it's very puzzling that it is not putting the resources into working with business to achieve those environmental goals," said Jane Milne, director of business environment at the British Retail Consortium.
Callton Young, director of sustainability and competitiveness at the Food and Drink Federation, said it was "surprised and disappointed" by the news.
And Friends of the Earth senior waste campaigner Michael Warhurst said : "This seems completely contradictory and raises questions about what the government is really up to and how joined up its thinking is."
Wrap staff now face an agonising wait to learn if their jobs are safe. A 31-day formal consultation is being arranged for early in the New Year, when it will be decided where the savings will be made.