The Labour administration's budget for 2019/20 was voted down at Hove Town Hall this evening (February 28)
The meeting has now been adjourned while leaders from the three main political groups attempt to thrash out a solution.
The Labour administration needed support from either the Conservatives or Greens to get its budget through.
But the Greens abstained from the main budget vote.
This meant 20 councillors voted for the budget (Labour and The Independent Group), 21 voted against (Conservative) and 10 (Greens) abstained.
Before the main vote, The Labour Group supported all five of the Greens amendments to the budget - with both parties voting down the Conservative amendments.
But the approved amendments are now irrelevant as the budget in his entirety was voted down.
They included putting funding back into sexual health services, reducing cuts to library services and additional funding for the homeless.
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After a political shake-up last week Labour now has 19 councillors, but has the support of the newly-formed Independent Group.
The Conservatives have 21 councillors and the Greens have 11.
Next week there will be a vote on who takes control of the council after Cllr Anne Meadows defected to the Tories last week.
Referring to the budget vote, and perhaps to next week's vote on which party controls the council, Conservative councillor Steve Bell said: "The ball is being batted from one side of the chamber to the other and the Greens are definitely the net."