The National Audit Office pointed to "serious delays" in applying new software for the National Programme for IT in the NHS and said the Government had underestimated the challenges involved.
In a progress report, the NAO concluded that while all elements of the £12.7 billion programme are advancing and some are complete, the original timescales for the Care Records Service - one of the central processes - were "unachievable, raised unrealistic expectations and put confidence in the programme at risk".
In particular, the software planned for the North, Midlands and East areas, called Lorenzo, has taken much longer than planned, forcing some trusts to take an interim system, the report found.
The IT programme involves four main projects: a centralised electronic medical record system for 50 million patients; an online "choose and book" system for booking hospital appointments - deployment of which, according to today's report, is nearly complete; electronic prescriptions; and fast network links between NHS organisations.
It is expected to link more than 30,000 GPs in England to almost 300 hospitals.
But it has come in for repeated criticism, including from committees of MPs, over the delays as well as fears over the security of patient information.
Due to contractual agreements meaning money would not be paid to suppliers until the systems are in place, the delays have not pushed up the estimated cost of £12.7 billion, the NAO said.
Actual expenditure to the end of March 2008 was in fact lower than expected at £3.6 billion because many trusts missed planned "go live" dates.
The report added that it was essential that NHS staff were convinced of the value of the programme in order for it to succeed.
According to a survey by the Department of Health last year, 67 per cent of nurses and 62 per cent of doctors expected the new systems to improve patient care.
Tim Burr, head of the National Audit Office, said today: "The scale of the challenge involved in delivering the National Programme for IT has proved to be far greater than envisaged at the start, with serious delays in delivering the new care records systems.
"Progress is being made, however, and financial savings and other benefits are beginning to emerge.
"The priority now is to finish developing and deploying care records systems that will help NHS Trusts to achieve the Programme's intended benefits of improved services and better patient care."
The IT system came under fire in the NAO's first report in June 2006, which criticised the fact some elements of the system - including electronic patient records - were two years behind schedule.
But in March this year, the Government defended the system, insisting it could produce more than a billion pounds in savings by 2014.
It calculated that the National Programme for IT could save the NHS £1.14 billion by 2014 based solely on the data from one in five trusts who had implemented parts of the system by March last year.
Edward Leigh MP, chairman of the Committee of Public Accounts, said the current timescales for the care records system to be fully deployed by 2014-15 "had better be realistic".
"The Department can't afford further knocks to the programme's reputation or our confidence in it," he added.
Mr Leigh also said: "The National Programme for IT was always going to be challenging. But, over time, the Department of Health has had its eyes opened to its enormous scale. And by building unrealistic expectations for delivery, confidence in the whole programme has been damaged.
"My committee reported on the programme last year and our recommendations have given the department and the NHS a push in the right direction.
"Our report has clearly had some real influence, focusing the department on the central issues. Progress has been made and the programme is advancing.
"But there is still a huge amount to do."
The British Medical Association called on NHS Connecting for Health, the Department of Health division responsible for managing the IT programme, to learn lessons from the NAO report.
Dr Chaand Nagpaul, GP negotiator with responsibility for IT, said: "It is clear from the NAO report that the setting of unrealistic deadlines has been very damaging to National Programme for IT.
"Slipping deadlines for new IT systems and the premature release of systems that are not fit for purpose has been deeply frustrating for NHS staff, leaving many doctors thoroughly disillusioned with the programme."
He said staff would only be confident in the system if progress became more transparent, and added that the public needed to be informed about electronic patient records.
"Staff must be kept abreast of how new technology is going to impact on their hospital or practice," he said. "More work needs to be done on achieving this at a local level."
A Department of Health spokesman said: "The Department regrets that one of the elements of the Programme, the care records service, is taking longer than was published as a tentative timetable in 2002.
"We have said before that this is due to a mixture of technical complexity and to allow further time for consultation and the development of the Care Record Guarantee, to meet the concerns that patients may otherwise have felt about the confidentiality of their records.
"The new IT systems in the NHS are on course to deliver better care and an estimated £1.14 billion in savings by 2014.
"The National Programme for IT has already delivered a total of £208 million in savings by providing quicker, more efficient and convenient patient care. As a result, every year 5,000 more patients are able to have their procedures performed because in the past 20 per cent of X-ray films used to go missing."
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