However, the department says the money, representing 2% of the entire NHS budget, was already identified for 'service transformation' in an Operating Framework published by Labour in December 2009.
Mr Lansley's White Paper Liberating the NHS aims to strip away NHS bureaucracy, abolishing SHAs and PCTs by 2013 and handing decision-making to GPs.
A highly critical article in the British Medical Journal puts the estimated costs of the reforms at around £3bn and argues that expensive NHS reorganisations do not work.
The DoH estimates savings from the reduction in management costs will reach £850m a year by 2013/14.
‘This money [£1.7bn] will be used to drive up the quality of services to patients and make them more efficient, as well as supporting the transition towards the White Paper vision,’ said a DoH spokesman.
Editor's blog: Health White Paper should mean more pay for GPs
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