A golden goodbye worth 500,000 will be handed to a council's retiring chief executive, The Argus can reveal.

Alan McCarthy, who is to stand down from Brighton and Hove City Council's top job by the end of the month, will receive the money after councillors agreed to his early retirement package.

The move comes as the council contemplates up to 26 job losses and a council tax increase of 3.5% from April.

Alex Bailey, director of strategy and governance, will be appointed interim chief executive on Thursday if it is agreed at a meeting of the full council.

Mr McCarthy, who earned 170,000 a year, is alleged to have made his decision to retire following a series of rows with senior councillors.

But, speaking publicly for the first time since his retirement announcement, council leader Mary Mears rejected the charge.

She said: "We had a good working relationship. He has been an excellent chief executive and I really do wish him well.

"This has been unfair on Alan. Early retirement is something he wanted to do. Unfortunately he wasn't really given the opportunity to say what he wanted to say.

"There are projects he wants to do. When they become clear people will understand what he is doing.

"Alan and I found it very amusing, all this innuendo and things are supposed to have happened."

The deal includes a oneoff, discretionary sum of £130,000, which has been described as a termination payment.

The remainder of the half-million pound package includes payment to his pension fund, the right to keep his laptop, mobile phone and lawyers fees.

This comes on top of his pension. Funds will be drawn from the council's pot for restructuring and redundancies.

After standing down as chief executive at the end of the month, the 54-year-old will continue to work for the council in another role until April.

When asked why Mr McCarthy was being paid such a large sum, Coun Mears said: "Alan is a very experienced and senior local government officer and there is a very strict procedure when people are asking for retirement."

On the issue of why the process has appeared rushed and the chief executive is leaving so quickly without a full-time replacement, she said: "The reason it may have appeared rushed is because it hadn't been formerly finalised before those people decided they had some information they wanted to leak.

"I believe the process wasn't allowed to take its proper course."

Mr McCarthy began negotiations on the deal through his lawyers in December, it has now emerged, but his departure was only revealed on Tuesday.

Conservative councillors on the governance committee voted in favour of the deal on Thursday night, while Labour abstained and the Lib Dem and Greens voted against.

Councillor Gill Mitchell, Labour group leader, said: "The size of this retirement package reflects the fact there is no real reason for Alan's departure.

"We believe this is an unnecessary burden on taxpayers and does give rise to the risk in the future that there will not be enough funds for other restructuring. It is an horrific mess."

Councillor Keith Taylor, Green convener, said: "The Greens do not support any discretionary payments to Mr McCarthy.

"At a time when thousands across the city are under increasing financial pressure and facing uncertain employment we believe the council's first duty should be to the residents."

Councillor Paul Elgood, Lib Dem leader, said: "Clearly I cannot breach the confidential agreement but I do feel the public have a right to know the Lib Dems did not support it and felt it was an unacceptable payment at a time of a recession.

A council spokesman said: "A committee of democratically elected councillors has agreed the terms of the early retirement.

"The terms are a private matter between the council and Mr McCarthy."