Patricia Hewitt, the Health Secretary, defended costly delays to the start of a £1bn project to rebuild two ageing hospitals yesterday.

She gave her approval to the redevelopment of Barts and the Royal London in east London - two months after ordering a review into whether the scheme should go ahead.

Patients' groups claimed the hold-up had added an extra £35m to the project's cost, but Ms Hewitt said that new savings of £650m had been found.

It will be Britain's largest private finance initiative-funded hospital redevelopment and will create Europe's largest accident and emergency unit at the Royal London. The project includes state-of-the-art cancer and cardiac facilities, and when fully complete in 2016 will provide up to 1,248 beds on the two sites.

Formally approving the scheme, the Health Secretary met doctors, nurses and patients at Barts before travelling on to the Royal London. She argued that the delays had been essential to ensure large amounts of public money were properly spent.

Ms Hewitt said: "The project only came to us for final approval in September last year. "There are hundreds of pages of legal documentation that have got to be pored over and I made the decision that I had to be absolutely certain that we were getting the right facilities for this part of London and that we were getting the best possible value for money for patients before we committed over £1bn in capital for the next 35 years."

Paul White, chief executive of Barts and The London NHS Trust, said: "After decades of under-investment, the people of east London and our 8,000 staff can now look forward to the world-class new hospitals they deserve.''