Asylum seekers will be given a halfway house at a Sussex hotel after a shock Government U-turn.

In November, the Home Office told Brighton and Hove City Council it would not be using the Grand Ocean Hotel in Saltdean as emergency accommodation for arrivals.

But yesterday it was revealed the Home Office changed its mind - to the fury of residents who mounted a vigorous campaign against the application. They say they have been misled by Home Secretary David Blunkett.

City council chief executive David Panter said the reversal came as a surprise. It contradicted a letter from the Home Office written only six weeks ago.

The hotel had insisted it had made no application to be considered as a temporary hostel despite persistent rumours in the village.

Mr Panter last night told councillors: "The new letter states the Home Office has now decided to contract bed spaces at the Grand Ocean Hotel.

"I can assure you we briefed you in good faith in November that the Home Office would not proceed with the application made by the hotel proprietors. This letter has taken us all by surprise and we are clearly concerned at this volte-face by the Home Office.

"We have contacted the Home Office Induction Centre project manager by phone to verify the position. She will be visiting next week to discuss details. Between now and then, we will be doing all we can to clarify the situation and we will continue to keep you informed at every opportunity."

Rottingdean and Saltdean Tory councillor David Smith said: "I am disgusted. It does not make sense."

Councillor Lynda Hyde, who helped organise a meeting in the autumn attended by 200 worried residents, said: "I am disgusted.

"There are 598 beds at the Grand Ocean Hotel and if they are all taken up by asylum seekers there will be hell to pay in this residential area.

"The infrastructure will be unable to cope with the special needs and requirements of asylum seekers."

No one from the hotel was available for comment last night.