The long-awaited scheme for a new children's hospital in Brighton was today given the financial go-ahead.

The Government announced £25 million to build a new state-of-the-art home for the Royal Alexandra Hospital For Sick Children in Brighton through a £1.1 billion programme of public/private hospital building.

It means Brighton Health Care NHS Trust, which runs the hospital, can start looking for a private sector partner willing to invest in the project to replace crumbling Victorian facilities at the Royal Alex buildings in Dyke Road.

If successful, a new children's hospital would be built in the grounds of the Royal Sussex County Hospital site in Eastern Road.

The scheme was approved in principle a year ago by Health Secretary Alan Milburn but the trust has had to wait until now for permission to start looking for a developer to take on the building contract.

The Brighton trust, which runs both hospitals, would appoint private partners to build, manage and maintain the new building.

Mike Collinson, chief officer of the patients' watchdog Brighton, Hove and Lewes Community Health Council, welcomed today's announcement.

He said: "Modern medicine says all hospital services, including children's services, should be on one site.

"But if the trust is not able to find a private partner willing to make this investment then it will have to go back to applying for public money, so this news does not mean the plan can definitely go ahead."

The new hospital would have 12 more beds than the current building and be closer to facilities such as MRI and CT scanners and the pathology department.

Staff would have access to the accident and emergency hospital at the RSCH and back-up from other specialist staff.

The trust is expected to advertise for private bidders to take on the building contract in the next few weeks. Work is planned to be complete by April 2007.

No firm decision has been made about the fate of the current Royal Alex buildings, some of which date from the 1880s. It is thought they may be sold for residential use.