The NHS National Programme for IT, which is now budgeted at £11.4 billion, has no chance of delivering value for money and has failed on all of its crucial elements.

That is the verdict of a sharp report, compiled by the National Audit Office, that the prime minister has publicly insisted on assessing before any more deals are signed with suppliers. The report will be followed by Public Accounts Committee hearings and a Treasury report, which will also precede any signature.

In an unprecedented statement, the Department of Health has now acknowledged that "the original vision was flawed".

Last week the prime minister said he was “very concerned” about the project, and warned in effect that the Cabinet Office could intervene and insist that all or part of a £3 billion contract with CSC is cancelled. CSC has promised on a U-turn in strategy, after it missed multiple deadlines on the project and saw one of its key ‘early adopters’ – meant to act as a demonstrate site – walk away from the programme.

Today, the NAO has stated categorically in its ‘Update on the delivery of care records systems’ that the £2.7 billion spent on detailed care records – the central element of the programme – “does not represent value for money”.

“Based on performance so far”, the NAO said, it has “no grounds for confidence that the remaining planned spending of £4.3 billion on care records systems will be any different”.

A total of £6.4 billion has been spent on the entire programme so far, including £2 billion on the systems in place such as the broadband network and a digital X-ray system. Some £1.7 billion has been spent on programme management and local system maintenance.

The programme is now scheduled to be delivered by 2015-16, at least five years later than the original plan. But the NAO warned that even this was “unlikely”, particularly in the North, East and centre of England where CSC operates, because it would require two systems to be delivered every month – after only four were delivered over the last seven years.

Additionally, in an effort to keep the programme moving the department has changed strategy so that some hospitals build on existing systems. Integrating this technology with IT under the National Programme is expected to cost £220 million.

The NAO heavily criticised the Department of Health for failing to provide any benefits statement against which performance could be measured. In the main hospitals, the systems were “mainly providing administrative benefits, rather than clinical ones”, the NAO warned. They had failed to assist tasks such as prescribing and administering medication.

The NAO also expressed grave concern that the department had renegotiated a £1 billion contract with BT to barely cut the cost of the deal while removing around half of the work. The NAO warned that a similar style of deal with CSC could be forthcoming.

The findings of the report prompted an angry reaction from the Public Accounts Committee, which said it will examine whether the programme should be abandoned altogether, given there was no assurance of its financial or clinical benefit. Next Monday the committee will begin to hold hearings in order to grill Department of Health IT executives.

“The Department of Health needs to admit that it is now in damage-limitation mode,” said National Audit Office chairman Amyas Morse, as the report was published. “The original vision for the National Programme for IT in the NHS will not be realised.”

He added: “The NHS is now getting far fewer systems than planned despite the department paying contractors almost the same amount of money. This is yet another example of a department fundamentally underestimating the scale and complexity of a major IT-enabled change programme.”

The Department of Health said that the money spent so far “has not been wasted and will potentially deliver value for money”. It added: “This is based on the fact that more than half of the trusts in England have received systems under the programme and no supplier is paid for a system until that system has been verified by that trust to have been deployed successfully.”

"We agree change is needed and that the original vision was flawed," it said. "This is why last year we announced a move away from a centralised, national approach to IT to localised responsibility and decision making."

As the programme proceeds during the time of a complete overhaul of the NHS, the National Audit Office warned that “it is not yet known who will manage the existing contracts up until July 2016”, when the programme is due to finish. During times when another £4.3 billion could be spent, it was also unclear "who will measure and report on the benefits".