The cabinet minister leant back into his chair and took a fortifying swig of his drink. Then, in a voice that blended bravado with fatalism, he said: "It's going to be absolutely horrendous. We're doomed to be extremely unpopular. Doooomed."

He was anticipating the public reaction to the ferocity of the spending squeeze that George Osborne will unveil in just five weeks' time. Put aside everything else that has occurred in the life of the coalition to date. None of it amounts to anything more than foreplay compared with the comprehensive spending review, the results of which are scheduled to be announced on 20 October. All other activity within Whitehall has now virtually ceased as cabinet ministers who are trying to protect their budgets do battle with the Treasury which is demanding cuts the like of which have not been seen since… well, that raises an interesting question.

Just how far back do you need to reach to find a squeeze of comparable severity? Will it be as bad as the 1980s? It will be much worse than that. There is a smattering of ministers and officials who have been around long enough to remember what it was like in the time of Margaret Thatcher. These veterans say the coalition's cuts will be much, much deeper than anything implemented by the Iron Lady and Sir Geoffrey Howe. One seasoned figure reports that ministers are having to agree to cuts which involve a level of political risk he has never known in his long career.

The 1930s then? Is that how far back we should go? This is disputed by Nick Clegg. "We are not going back to the 1930s," he insisted in a speech last week before frankly admitting that voters are "confused and frightened" and public sector managers are already in a "panic" even before they know precisely what is in store. That reflected panic and fright on his own part, and that of other cabinet members, about how the public is going to react.

A senior Tory in the cabinet agrees with the Lib Dem leader that it is not comparable with the 1930s. This minister thinks the decade you have to go back to is actually the 1920s. There has not been a spending squeeze like it, remarks this minister with a sense of history, since "the Geddes Axe". Then, too, Britain was ruled by a Tory-Liberal coalition. Then, too, its policy was driven by alarm about the national finances, in that case the debt run up during the First World War. Sir Eric Geddes, a businessman, was put in charge of a committee to recommend cuts. By the time his blade had stopped swinging, the defence budget had been slashed by more than 40% and the number of civil servants had been reduced by over a third.

The Geddes Axe scythed through everything, from welfare payments to secondary education. To this day, economists still don't agree whether it was necessary or wise. Some believe those cuts helped Britain to make a swifter exit to recovery from the vicious recessions of 1919 and 1921.

Others contend that it did terrible damage to the economy. In other words, precisely the same argument that rages now about the wisdom of this coalition's deep and quick approach to deficit-cutting. Mounting resentment about the effects of the Geddes cuts was in part responsible for triggering the general strike of 1926.

Today's trades unions are not yet talking about staging another one of those. But when the TUC meets in Manchester this week, the city's G-MEX centre will reverberate to union leaders threatening co-ordinated industrial action in response to job cuts, pay freezes and pension reductions. The coppers' union, the Police Federation, is already crying that "Christmas will come early for criminals" if police numbers are reduced. That is just throat-clearing by one of the multitude of interest groups that will roar with furious protest when the cuts start to bite.

Only now are members of the coalition truly beginning to appreciate what they will face. Government is an education, especially for parties that were previously in opposition for a long time: 13 years in the case of the Conservatives and many decades in the case of their Lib Dem partners. Before they took office, a lot of the Tories entertained a blithe belief about spending. They didn't expect it to be easy to make cuts, but they rather thought that it might turn out to be not that awful either. In the pre-election period, members of David Cameron's senior team would privately argue that the state had become so bloated under Labour that they would find plenty of fat to cut before they hit bone. They believed quite a lot of the deficit could be mopped up through "efficiency savings".

Now they know better. It is one of the easiest cries in opposition to shout: "Cull the quangos." That is proving hard to do even for such reflexive quango-cullers as Tories. One Conservative minister says: "At first glance, you think: that can go. Then you take another look and you find that a lot of these organisations exist for a purpose."

Some ministers say they are finding examples of wasteful spending that can be terminated without much impact on the public. Others have gone looking for relatively pain-free savings and come back empty handed. One minister says: "I keep thinking that if I dig deep enough I will find something, but to be honest there isn't all that much."

Then there is the human factor. Labour tribalists won't believe this, and the Treasury axemen won't like it, but it is quite rare to find a minister, Conservative or Lib Dem, who relishes firing people. They are already having to confront the personal cost of cuts when making decisions about their own civil servants. One Tory minister says: "We all attacked 'faceless bureaucrats' when we were in opposition. They aren't faceless anymore. They are people working in the department and they are nice people. They are people with children, people with mortgages to pay."

In theory, the cabinet as a collective has signed up to delivering the cuts. In practice, individual spending ministers are fighting the Treasury. George Osborne is hoping to reach agreements with some of the cabinet very soon in order to put pressure on the rest. As an additional incentive to settle early, those ministers who do so are then given a seat on the "Star Chamber", the body that will arbitrate when negotiations between cabinet members and the chancellor become deadlocked.

The Treasury is particularly keen to have Ken Clarke and Chris Huhne on board. Mr Clarke would bring to the Star Chamber the authority and experience of someone who has seen things from both sides, as a chancellor and as a spending minister. Mr Huhne, whose performance as a minister has impressed his Tory colleagues, would enhance the coalition credentials of the Star Chamber by seating a second Liberal Democrat on the court of appeal. Both men seem to be more advanced towards a settlement than many colleagues, but both have also told friends that they are not going to rush to an agreement for the mixed pleasure of sitting in judgment over their colleagues.

The negotiations are splitting the cabinet. Even when times are good, spending rounds turn colleagues into competitors. Ministers are desperate to know how their counterparts are faring. If a colleague wins an extra £1bn from the Treasury, that is £1bn that will have to come out of someone else's department.

Relations between the Treasury and the biggest of the spenders, the Department for Work and Pensions, are becoming especially bitter. George Osborne pre-empted his own review last week when the chancellor declared that he had already identified an additional reduction in benefits worth £4bn on top of the £11bn of cuts announced in the budget. That was news to Iain Duncan Smith. Early in the process, Mr Osborne tried to put peer pressure on Mr Duncan Smith when the chancellor suggested that other departments would not have to suffer so much if more swingeing cuts were made to welfare benefits. "We're relying on you to find us the money," one of Mr Duncan Smith's ministers was told by a minister from another department. "Fine," replied the DWP Minister. "So long as you don't mind having a lynch mob outside your constituency office."

Yes, it has already got to the point where ministers are threatening each other with lynch mobs. One Lib Dem member of the cabinet recently gave me his private estimate of where the opinion polls will be in about a year's time. His forecast was: "25-5". By that, he meant the Tories will slump to 25% over the next 12 months and the Lib Dems will collapse to 5%. This was not a frivolous forecast, but a deadly serious one.

If this proves correct, the mechanisms the coalition wants to introduce to fix the length of the parliament at five years will be redundant because they will have been rendered irrelevant. Neither the Tories nor the Lib Dems would dare precipitate an early general election which would see the Conservatives devastated and the Lib Dems obliterated. If they are doomed to become extremely unpopular, they are also doomed to hang together- or they will hang separately.