(AAP) The British government has not decided to withdraw troops from Iraq, although contingency planning is under way, Prime Minister Tony Blair's office said.

A leaked government memorandum shows Britain is considering scaling back its troop presence from 8,500 to 3,000 by the middle of next year, saving an estimated STG500 million ($A1.18 billion) annually.

The memo, marked "Secret - UK Eyes Only", and signed by Britain's Defence Secretary John Reid, also says there is a "strong US military desire for significant force reductions".

"Emerging US plans assume that 14 out of 18 provinces could be handed over to Iraqi control by early 2006," which would see the multinational force cut from 176,000 to 66,000."

British officials on Monday confirmed the authenticity of the document, first published by The Mail on Sunday newspaper.

Hey, we need to free up troops for future adventures in Iran and Syria! Remember the PNAC plan...