The planned reorganisation of the NHS in Wales could cost substantially more than expected, it has emerged.

A review by the Auditor General for Wales into the cost of abolishing the five health authorities and replacing them with 22 local health boards casts doubts on earlier claims by the Welsh Assembly Government that it would be "cost neutral".

He has estimated savings of at least �8.5m would need to be made in order for that to be achieved.

Jane Hutt: said report was "very favourable"

The reforms are set to be implemented in April 2003.

In a meeting of the assembly's health committee on Wednesday, Health Minister Jane Hutt said her figures provided a "sound basis" for the proposed changes.

However, a letter from the Auditor General, Sir John Bourn, to the Director of the NHS in Wales, Ann Lloyd, stated: "There are major uncertainties with many of the estimated transitional and running costs."

..."It is not immediately clear how savings of �8.5m necessary to achieve cost neutrality will be made.

"At the present time, management cannot be certain that cost neutrality will be achieved."

Part of the letter was quoted in the committee session by the Conservative spokesman David Melding.

He said Ms Hutt's promise that the reforms would not come at a cost was "not worth the paper it was written on".

You have been shown to be slipshod and to have made assurances without any reasonable evidence David Melding AM

He told the committee he had asked the Presiding Officer for an urgent plenary session debate on the contents of the letter.

Sir John Bourn accepted an invitation from Ann Lloyd to undertake an independent review of the transition and running costs of the new NHS structures.

He delivered his conclusions in a letter to Ms Lloyd earlier this month, which was circulated to members of the health committee.

As well as indicating that �8.5m would need to be saved to achieve "cost neutrality" in running costs, the Auditor General was quoted as saying that transitional costs in implementing the new structures remained uncertain.

He said in his letter: "I recommend that you consider adding a reasonable contingency to the budget."

'Constructive'

Mr Hutt told the committee she thought the Auditor General's report was "very favourable".

It heard transitional funding arrangements of between �12.5m and �15m were in place to meet any contingencies.

Assembly civil servant Brian Mitchell agreed with the minister's view that the letter was "generally constructive".

However, Mr Melding said the contents of the letter amounted to a devastating critique of Ms Hutt.

"You have been shown to be slipshod and to have made assurances without any reasonable evidence," he told her.

"And when I read the letter from Sir John Bourn I thought it was as forceful and devastating as it could be given the diplomatic niceties that have to be observed when people are dealing with powerful ministers."