The National Audit Office has confirmed that it is 'watching with interest' the Department of Health's cancellation of at least seven of the planned new independent sector treatment centre schemes.

In a written parliamentary statement last Thursday health secretary Alan Johnson said seven out of 17 planned treatment or diagnostic schemes would not go ahead. That included a diagnostic service in the West Midlands run by Care UK which had already begun work but had an 'unacceptably low rate of use' of 5 per cent.

Mr Johnson said he had been advised to proceed with 10 more schemes, but only three of those have been given final approval to sign off their contracts, which have a combined value of£200m a year.

The schemes, which were first announced in 2005, were supposed to include contracts worth£750m a year. The DoH has admitted that the protracted procurement has so far cost it£84m, including£8.4m paid in compensation to bidders whose contracts were cancelled at the last minute.

A spokesperson for the NAO said: 'We are very aware of Parliament's interest in this and we are considering a study.'

Mr Johnson said the downsizing of phase two of the ISTC scheme was due to 'pragmatic not ideological reasons'.

Increases in NHS productivity since the announcement of the schemes reduced the need for extra private sector capacity, he said.

Cuts to phase two of the ISTC programme came as the DoH published details of usage rates at the 27 schemes under phase one.

They showed that five schemes were performing at 60 per cent of contracted capacity or less. That included the£27m Will Adams treatment centre in Medway, which was performing at just 48 per cent of planned capacity.