Up to one in two of the staff at the Department for Culture, Media and Sport are to be made redundant as part of the cuts programme submitted to the Treasury by the culture secretary, Jeremy Hunt.

Hunt has also proposed moving out of the well-appointed departmental headquarters in Cockspur Street, just off Trafalgar Square, with the remaining staff finding room in a different, existing departmental building.

In a move which will send a chill through the arts world, Hunt, who has proposed cuts of between 35% and 50% of all staff, believes he will not be able to win support for the coming deep cuts in arts and media budgets unless he leads by example.

All government departments have been told by the Treasury to offer cuts of between 25% and 40% of total budgets. Some departments have failed to meet the Treasury deadline or are refusing to produce 40% cuts, saying it is not realistic to do so, and therefore a waste of time.

Ministers who settle early with the Treasury have been told they can then sit on the star chamber set up to arbitrate on departments that refuse to settle until September or October.

The DCMS, even now still referred to in some circles as the "Ministry of fun", has one of the smallest of Whitehall budgets at £2.1bn, compared to, for example, the defence budget of more than £36bn. It also has one of the smallest workforces – 590 of the 468,700 civil servants employed by central government.

Arts organisations are bracing themselves for a torrid time because Hunt wants to keep publicly-subsidised free entry to national museums, on the basis that it improves tourism and the wider creative economy. An initial trawl has also found little suggestion of waste or mismanagement in the preparation for the Olympics in 2012.

This effectively leaves arts, media and heritage. The DCMS has already asked the biggest arts organisations to provide models of how they would implement cuts of 25-30% over four years, and what the effects would be.

Arts Council England, which receives £445m to give out to 850 organisations around the country, has warned that it would have to stop funding for at least 200 organisations. Arts Council England's chief executive, Alan Davey, this month wrote to all its regularly funded organisations outlining the bleakness of the climate and asking them to at least be prepared by modelling for a 10% reduction in funding for the next financial year. But while arts leaders realise they cannot be immune to cuts, they are not prepared to go down without a fight.

Last week, aware that Hunt was seeking an early DCMS settlement, the leaders of some of the UK's biggest arts organisations – such as the Tate, National Theatre and RSC – gathered in London where they warned that 25% cuts would irreparably damage the arts.

They argue that only tiny amounts are spent on the arts in any event – just 0.07% of the public purse – and for every pound invested at least £2 comes back into UK coffers. The RSC's Vicky Heywood warned that drastic cuts would mean fewer productions, less travelling and higher ticket prices.

The government is hoping to plug funding cuts by encouraging more private philanthropy but it is a route fraught with problems, not least the danger of safer, more conservative programming. Some of the UK's most generous private donors, including Sir John Riblat and Anthony D'Offay, have also written to ministers pointing out that they give as an addition to, not a substitute for, public spending.

The potential for a cuts programme to lead to the closure of a prominent theatre company is exercising minds in Whitehall. Hunt, though, is determined that by setting an example through attacking staff and bureaucracy surplus in his own department he will be able to persuade arts groups, museums and galleries to focus on their administrative cost base rather than frontline services.

If enormous cuts are, as seems likely, announced in the October spending review, many in the arts world are lobbying for them to be phased in gradually.

The cuts that will be batted about within Whitehall will come on top of some £73m of cuts already decided by the DCMS, including the cancellation of the £25m Stonehenge visitors centre; the suspension of the £12m libraries modernisation programme; cancelling the £45m contribution for a new BFI film centre; and axing free swimming for the young and elderly.