The story
Coined by Christopher Hood and Maurice Wright in 1981 in Big Government in Hard Times. The implication is that the public service is deliberately cutting off its own hand to make a dramatic point.
Etymology from Wiktionary, CC BY-SA 4.0.
bleeding stump
Today it means: A deliberate disruptive or high-profile reduction in a public service, intended to demonstrate the impact of funding cuts and motivate opposition. Full definition →