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Plans for hundreds of homes on an ex-industrial site that a council had earmarked for a hospital have been approved by the assembly government.

Newport council wanted to use the former railway sidings at Maesglas as a new site for the Royal Gwent Hospital.

But Network Rail appealed after its bid to build 575 homes did not win backing from the local authority.

The council said it would continue to press for the new hospital to be built in the area.

Housing Minister Jane Davidson agreed there were no grounds to delay granting a planning permission for the sidings site alone.

In 2003, regeneration company Newport Unlimited annouced ambitions to "redevelop the former Whiteheads Steelworks site and Monmouth Bank Railway Sidings for the provision of a new hospital".

It said: "The city will need a new and more modern regional hospital within the lifetime of the regeneration".

Network Rail has had its own plans for the 37-acre (15.3 hectare) site which had been a network of railway sidings serving Newport Docks.

A planning application submitted in 2007 was not determined by the Newport planners and Network Rail appealed to the assembly government.

Property advisor Savills has been enlisted by the firm over the last four years.

In a statement, Savills said: "Newport City Council had sought to resist the development proposals on the basis that they wished to see the site planned and developed alongside the adjacent Whitehead Works site, which lies vacant following the closure of the Corus steelworks in 2005.

Best option

"The council was seeking to safeguard land for a potential future replacement hospital for the Royal Gwent.

"The minister agreed with the appointed inspector that the proposals were entirely compliant with the planning policies for the area and that there were no grounds to delay granting a planning permission for the sidings site alone."

In a letter to Savillis, officials for Housing Minster Jane Davidson said: "She agrees with the inspector that the manner in which the proposal has addressed sustainability and affordability is satisfactory and does not support the refusal of the proposal."

Newport council leader Matthew Evans said: "We believed the site needed to be planned comprehensively with the adjacent Whiteheads site to include a new hospital as well as housing.

"Despite this decision, we will continue to press for the new hospital to be sited on the Whiteheads site as we strongly believe this is the best option for patients, visitors and staff."