The £12bn NHS IT programme needs to be scaled back, but there is no intention of scrapping it, confirmed Health Secretary Andy Burnham at an emergency Commons question time.
It is hoped that paring back the electronic patient record system to just its core elements would save the government £600m.
Shadow Health Secretary Andrew Lansley said rarely had the Commons seen a "more abject example of the government's incompetence".
Ministers had got the scheme "hopelessly wrong" and were now, belatedly, putting a stop to this "continuing disaster".
Earlier this week, Chancellor Alistair Darling disclosed ahead of Wednesday's Pre-Budget Report that he would be delaying parts of the IT scheme in what the Tories described as a "massive U-turn".
The IT programme – thought to have cost about £12bn so far – was commissioned in 2002 by then Prime Minister Tony Blair, and was meant to be completed by 2010.
Mr Burnham told MPs the project was already bringing benefits and was a "key part of delivering modern, safe, joined-up healthcare."
Ministers planned to take forward those elements of the scheme which could deliver the most benefit to patients and frontline staff "while cancelling certain additions to the system, where it makes sense to do so".
He said: "We have no intention whatsoever of cancelling the programme overall, not least because it is already making the NHS safer, more efficient and more convenient for patients.
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Has the government made the right decision to scale back electronic records? Your comments (terms and conditions apply):
"Yes, and not before time. This has been another example of government being unable to identify exactly what is needed by the frontline services. The best thing to come out of the project is GP2GP, which is what the GPs asked for in the first place" – Name and address withheld