Deputy Prime Minister John Prescott has officially lifted the threat of "capping" from Brighton and Hove City Council.

As predicted by The Argus earlier this week, he opted against penalising the authority for its 7.7 per cent council tax rise.

Mr Prescott had warned the council it was on a "hit list" of 65 authorities being considered for capping after it floated the idea of a double-figure increase.

Council leaders responded by voting through an increase of 7.7 per cent, cutting budgets by £8.5 million.

Yesterday, Mr Prescott confirmed he was only capping unitary authorities which had put up tax by more than 8.5 per cent.

The councils which were singled out by Mr Prescott had also increased their total budgets by more than 6.5 per cent.

Sussex's district councils, East Sussex County Council, West Sussex County Council and the police and fire authorities also had their increases passed by the Government.

Nationwide, the Government capped six local councils and one fire authority.

It warned three police authorities and four fire authorities it might take similar action in the future. Local government minister Nick Raynsford said: "We believe the actions we are taking represent a measured response to the increases we have seen this year."

The prospect of capping had left finance bosses in Brighton and Hove facing a huge bureaucratic headache.

They would have had to send new bills to every household explaining the decision and giving a new total payment.

Direct debits for residents who pay monthly would have had to be adjusted, while any householder who had paid the total up front would have been entitled to a rebate.

The cost of sending out new bills alone could have run to thousands of pounds.

Brighton and Hove finance councillor Simon Burgess said: "It's recognition by the Government that we had a tough settlement in this year's round of grants to councils."

Brighton and Hove original estimated it would have to increase council tax by 17 per cent.

Liberal Democrat group leader Paul Elgood said: "We worked constructively to ensure a single-figure council tax increase and a budget which was not capped.

"In doing so, we also helped to ensure the least damaging cuts were made to services."