It is a grisly scenario: 650,000 deaths, with bodies piled up in shipping containers before being buried in mass graves all over the country.

That is the nightmare envisaged by the Government in what it describes as the "very likely" event of a bird flu pandemic.

The alarming prediction is contained in a confidential Home Office document drawn up to help councils and other organisations deal with a catastrophic outbreak of the deadly H5N1 strain of the virus.

It says that an estimated 650,000 people in England and Wales could die from the virus in a "reasonable worst-case scenario" – more than double the 320,000 estimated in the "prudent worst-case scenario".

The document warns: "The possibility of a worldwide influenza epidemic (a pandemic) presents a real and daunting challenge.

"There has been an unprecedented increase in avian influenza amongst domestic and wild birds in Asia and Europe… History and science suggest that we are very likely to face influenza pandemics this century."

With such a huge death toll, it says cemeteries would be under enormous pressure.

"Inflatable structures" and containerised storage "like those used at ports and freight terminals" could be used as makeshift mortuaries to store bodies before they are buried. The Department of Health advises that refrigerated vehicles and trailers should not be used – but admits that this may not be possible during a pandemic.

Large-scale "common graves" would be needed to accommodate the mountain of bodies, and ensure burials were carried out swiftly.

However the document, called "Planning for a Possible Influenza Pandemic – A Framework for Planners Preparing to Manage Deaths", says the process "would still allow for individual burial plots and marking of graves".

The wishes of families should be considered when planning the graves, the draft guidance says.

They should be "deep enough to allow for additional family burials – but not too deep or densely used to make difficult the removal and re-interment of the remains elsewhere, if this is requested at a later date".

In addition, the choice of coffins and types of funeral services will be limited in an attempt to help manufacturers meet the demand, and chapel services will be "basic and shorter".

Coffins for cremations will have to be re-used if there is a shortage.

The report is being sent out to all organisations that will be involved in preparing for a pandemic, including faith groups.

Other proposals contained in the paper include suspending exhumation powers and coroner's juries and cancelling inquests into deaths from natural causes in prisons.