The UK Department of Health has scrapped the £12.7 billion NHS National Programme for IT (NPfIT).
Individual healthcare trusts are instead being charged with the responsibility for deciding what IT they need in a "locally-led plural system of procurement".
Nationwide programmes that are already up and running will continue to be managed by the NHS. These include Choose and Book, the Electronic Prescription Service and Picture Archiving and Comunications System (PACS), which enables practitioners to electronically share X-rays, scans and other images.
The NPfIT project, thought to be the largest civilian IT project in the world, and was intended to connect 30,000 GPs with over 300 hospitals and provide a centralised electronic database of patients’ healthcare records.
The project had come under fire for its ballooning budget, which more than doubled from initial predictions of £6 billion.
Announcing the decision, health minister Simon Burns said: "Improving IT is essential to delivering a patient-centred NHS. But the nationally imposed system is neither necessary nor appropriate to deliver this. We will allow hospitals to use and develop the IT they already have and add to their environment either by integrating systems purchased through the existing national contracts or elsewhere.
"This makes practical sense. It also makes financial sense. Moving IT systems closer to the frontline will release £700 million extra in savings. Every penny saved through productivity gains will be reinvested to improve patient care."
The scrapping of NPfIT, which had been rumoured for some time, is part of the coalition government's broader programme of cost cutting, aimed at addressing the UK's budget deficit.
But Dr Chaand Nagpaul of the British Medical Association's GPs committee, warned that the arrangements could give rise to wide variations in provision across the country:
"The provision and experience of IT for clinicians on the ground is likely to vary according to the level of support and resources available locally. It is important that successful national IT initiatives are not lost, and that innovation is not stifled."