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Ministry of Defence (MoD) officials are examining proposals for an army of 60,000 soldiers, former coalition defence minister Sir Nick Harvey has said.
Sir Nick said paper exercises were going on to examine further cuts to troop numbers due to the impending "financial crunch" faced by the MoD.
The Government's existing Army 2020 plans envisage a shrunken regular force of 82,000 with the number of reservists rising to 30,000.
Sir Nick told MPs: "There are already paper exercises going on in looking at what an army of just 60,000 would look like because of the financial crunch that the department is going to be facing."
The Liberal Democrat MP was speaking in the Commons during a debate on Trident renewal.
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Former defence minister Sir Nick Harvey said the government is looking at ways to cut the army even further because of the credit crunch.