Health secretary Jeremy Hunt said the Government is not yet in a position to "write a cheque" for the redevelopment of Watford General Hospital.

Mr Hunt, MP for South West Surrey, visited the hospital today, meeting with doctors and nurses and working part of a shift in the accident and emergency department.

Plans to redevelop the hospital’s old wards and facilities, and build 600 homes on the site, are currently being drawn up as part of the Watford Health Campus scheme.

The secretary of state for health described many of the hospital’s buildings he saw today as "not fit for purpose" and described the planned regeneration of the site as "an excellent plan".

However, he said more work needed to be done, particularly in the hospital’s current system of discharging patients into community care, before the Government would be in a position to hand over any cash to the scheme.

Mr Hunt said: "A lot of the buildings here are not fit for purpose and I fully support the management of the hospital who are very keen to redevelop the site.

"It sounds an excellent plan and I wish it every success. Obviously they need to work out the plans in detail but I hope it is something we are able to approve.

"There is more work to be done locally before we are in a position to approve it. I imagine we’re going to be asked to write a cheque at some stage, so the Government plays quite an important role."

The current plan for financing the scheme involves Watford Borough Council giving the land to a private company, who will develop the site and then split the profit.

It is thought the scheme, known as a "local asset backed vehicle", will phase out the private-finance initiatives previously used to fund hospitals, which have caused spiralling debts within the NHS.

Mr Hunt said: "We’re having to spend £1.6 billion of NHS budget a year to finance these PFIs and that could be spent on frontline care.

"We’ve completely stopped the old system of PFIs and won’t approve any which lead to a financial burden which is unsustainable.

"We’re not against private investment but it needs to be in a much more vigorous way."

The LABV scheme involves signing into a contract with a private-sector company for 20 or 30 years in exchange for a new hospital capable of treating 500,000 people.

In contrast, this week Dr Michael Dixon, president of NHS clinical commissioners, said in the future hospitals could be downsized or closed altogether as 50 per cent of their services could be done elsewhere.

Mr Hunt said: "People in this hospital would agree with what Mike Dickson says. One of their biggest challenges here is not having a good system for discharging people who are ready to go home.

"There is so much bureaucracy in getting people into continuing care or the social care system.

"The big change is that 65 years ago the vision you had was that someone would come to hospital needing a new hip and they would leave better.

"Now people are leaving hospital with long term conditions and complex medical needs and we need a better system of caring for people in the community than we have at the moment."

Mr Hunt suggested that although he was in favour of the health campus scheme, the Government would manage it at arm’s length.

He added: "We are keen to approve as many of these projects as possible but they should be locally led.

"We’ve learned that when these plans are driven from the centre they never end up being successful as they might be."