The UK government may stop using Microsoft as its main software supplier due to a rise in licensing fees that could increase costs by as much as 200 per cent.

"Depending on the system, Microsoft is asking for a rise in licence fees of between 50 and 200 per cent on government contracts," said Martin Day, spokesman for the Office of Government Commerce (OGC), Monday.

The OGC is in talks with Microsoft over a single contract to supply its Office and Windows software to the country's 497,600 public servants, Day confirmed. The UK government currently spends approximately £120 million pounds per annum on the direct purchase of Microsoft products, and believes the increased licensing fees would add up to £60 million a year to the bill, Day said.

Options Day could not comment on progress in talks between the government and Microsoft, but said one of the possible steps the government could take is to look elsewhere for its software needs.

The OGC was established in April 2000 by the government as a Treasury agency to modernize its IT procurement procedure, assuring that the government gets value for the money it spends on IT.

A Microsoft spokeswoman confirmed that talks were taking place, but would give no details of the company's initial proposals.

"Neil Holloway, Microsoft's UK chief, is involved with ongoing talks over license fees with the UK government," she said.

Upgrade path Microsoft has come under heavy criticism for its revamped licensing schemes for both corporate and home use of Windows and Office. When Microsoft launched Office XP in May, it also announced it would eliminate certain upgrades from previous versions. Users would have a deadline for upgrading their licensing rights, after which they would have to buy new licenses for Office XP - at a cost of up to $300 more per user - if they wanted to have upgrade protection.

Due to complaints from corporate users, Microsoft has twice pushed back the deadline for upgrading licenses. During the London release of Windows XP last month, Microsoft CEO Steve Ballmer addressed the controversial issue of the new licensing agreements for corporate customers, saying that the company had received a lot of feedback from customers - especially in the UK and France - but that he felt Microsoft had now addressed the problem by extending the deadlines.