The needs of children were put first when a service for challenging youngsters was started, a scrutiny panel heard.

Brighton and Hove City Council's assistant director for children at the time was Jenny Clark, who gave evidence yesterday.

The panel is looking into what went wrong with Palmeira House in Hove when the council and NCH Action for Children fell out over rising costs.

It was decided to end the service but parents of children contested this in the High Court and the service continued.

Ms Clark was asked by Labour councillor John Newington why the service started in 1998 before a contract had been signed.

She said the service had already been delayed and it was imperative to start because of the needs of the children including one whose placement elsewhere had ended.

Ms Clark added: "In hindsight we should not have commenced a service without a contract being signed."

She told the panel at Hove Town Hall that NCH had expertise in providing this sort of service for children and that was why it was selected.

But the charity's practice of hiring full-time staff on contracts meant its service was less flexible and more expensive than expected.

Concerns from the council about costs were raised during 1998 but it was still thought the service could be provided within the agreed budget of £360,000 a year.

It was not until almost two years later that the council realised this would not be possible.

Another hearing of the panel will take place on Friday and further meetings will be arranged next month before a report is produced.