PLANS for a new hospital for Newport on the site of a former steelworks suffered a major setback.

Following a public inquiry into proposals for the future of the city, an independent inspector feels the Whiteheads land would be better suited to housing.

Newport's unitary development plan, which sets the agenda for the development and expansion of the city over the next 30 years, had earmarked the site as a replacement for the Royal Gwent Hospital.

But mothballing the site, which borders Mendalgief Road and Cardiff Road, along with neighbouring land at Monmouthshire Bank Sidings for a hospital, might raise public expectations of healthcare provision "beyond what is realistic", inspector Robert Yuille concluded.

He also said he was not convinced there was "sufficient certainty" in the health authorities' plans for the replacement of both the Royal Gwent and St Woolos Hospitals.

There is general agreement that the Royal Gwent - cramped and with no scope for expansion - must be replaced in the next ten years.

Gwent Healthcare Trust and Gwent's five Local Health Boards are working on ambitious plans to restructure hospital services across Gwent, but a blueprint for this has only just been submitted to the Assembly for consideration.

However, potential hospital sites in the Newport area, and a timescale for completion, have yet to be examined in detail and the planning process could take several years.

Graham Moore, chief executive of Newport Unlimited, the city's regeneration company, said it was unfortunate the case was not made for the site as a potential location for a hospital.

Despite the city council's "disappointment" over this proposal it did convince the inspector on other, sometimes controversial, proposals to regenerate the city.

"While the plan covers policy until 2011, the scale of the projects included in the UDP will shape the city for decades to come," said a spokesman.

These included major expansion plans to the east of Newport on derelict parts of Llanwern steelworks and greenfield land to the north of the site.