The document, by consultancy firm McKinsey, says 137,000 jobs must be cut - a tenth of the NHS workforce - to achieve the savings.
Health minister Mike O'Brien said the DoH had already rejected the proposals, leaked to the Health Service Journal. 'In core frontline services like maternity, nursing and primary care we need more staff rather than fewer,' he said.
But Nigel Edwards, director of policy at the NHS Confederation, described the report as 'a sober analysis' and said it was possible to 'plan a reduction in headcount without mass redundancies', because 30,000 NHS staff retire or leave annually.
However, he said the 'slash and burn' tactics the NHS has used in the past were not the way it should tackle financial pressures in the recession.