Finance experts have questioned the value for money of a major Department of Health review aimed at cutting spending on arm's-length bodies.

The DH has slashed the number of the standalone organisations sponsored by the department to provide specialised services. It has also cut the number of people employed by the sector.

But about half the reduction in posts was achieved by transferring them to other parts of the NHS. In a few cases staff were made redundant only to be re-hired as consultants.

A report by the National Audit Office said it was hard to judge the value for money of the exercise, which cost£61m, including£47m in redundancy costs.

The DH set out to cut posts by a quarter and achieved 3,400 towards that by changing the status of NHS Direct from an arm's-length body to an NHS trust. Nurses employed by NHS Direct will continue to do the same work but now count as "frontline" staff. The DH also plans to transfer NHS professionals out of the sector.

The NAO found the DH will have reduced spending on arm's-length bodies by£555m by 2007-08, exceeding a target of£500m. The number of posts will have gone down by 27 per cent compared with the 25 per cent target.

The DH has also managed to slash the number of arm's-length bodies from 38 to 23 but will not succeed in its goal of 20 by the end of 2007-08. It expects to achieve 20 bodies by the beginning of 2009-10, when complex moves such as the creation of the new Care Quality Commission will be complete.

Public accounts committee chair Edward Leigh MP (Con) said shutting five bodies not long after they had been established meant "a big question mark must be placed against the original value for money".

A spokeswoman for the DH said spending in 2006-07 was£275m less than in 2003-04 and that there would be a further reduction of£58m by the end of 2007-08.