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Implementation delays mean HM Courts & Tribunals Service will save less money than originally planned from its huge reorganisation of the justice system, a new report from the National Audit Office says.

The public spending watchdog acknowledged that HMCTS, which is an executive agency of the Ministry of Justice, had made progress with the project – which aims to save money from reducing the number of courts, digitisation and streamlining of services, and the centralisation of many functions.

But it said that a second timescale extension had added an extra year to the programme, meaning it would now not complete until 2023. Transforming Courts and Tribunals got under way in 2016 and had originally been expected to last for four years.

The NAO said that while the extra year added to the project timescale and the cancellation of two projects that are part of the broader programme did “not affect the broad objectives of reform”, they would reduce the lifetime savings anticipated from the project by £172m to £2.1bn by 2028-29.

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The programme has so-far seen the closure of 127 courts, with a further 12 to go. Bosses have also established the first two courts and tribunals service centres, which have standardised support for some civil, family and tribunal services.

The NAO said that while the £540m so far spend on the programme was under budget, this was because delays in completing projects have meant that fewer staff than expected had left, requiring fewer redundancy payments. The latest business case puts the cost of the reform at £1.175bn, according to the NAO.

NAO head Gareth Davies said the programme was at a critical stage and that HMCTS needed to make a key shift from designing new services to ramping up their implementation.

“HMCTS has made good progress in reforming some services, but it is behind where it expected to be and has had to scale back its ambitions,” he said. “The timescale and scope remain ambitious and HMCTS must maintain a strong grip if it is to deliver a system that works better for everyone and delivers savings for the taxpayer.”

HMCTS chief executive Susan Acland-Hood said there were many positives to take from the NAO update.

“We are pleased the NAO has recognised the progress we have made towards a more accessible and efficient justice system,” she said. “More than 300,000 people have now used our online services, and two new service centres are making it easier and quicker for all to access help. This is an ambitious and challenging programme but it is already making a significant difference.”