Communities Secretary Eric Pickles has moved to scotch indications the Government had softened its stance on Exeter's blocked bid for home-rule.
It came after the publication of Whitehall's response to a report by former Tory Cabinet Minister Michael Heseltine who had called for a bar on 'unitary' councils to be lifted.
While rejecting a wholesale move to scrap two-tier local government, ministers said they would not "stand in the way" of areas wanting to "voluntarily pursue unitary status".
However, they would rather local authorities look at coming together to share back-office functions.
But when tackled at a Westminster lunch with journalists, the Secretary of State rejected that this now gave the green light for Exeter to seek to go it alone.
In his blueprint for boosting economic growth published last year, Lord Heseltine argued legislation introduced by Mr Pickles to block Exeter's unitary bid was 'redundant' and should be repealed.
Although he implied this would be more to pave the way for authorities to come together to form unitary 'super' councils, and sweep away two-tier local government, which the Tory peer argued led to "duplication and inefficiencies" and made it more difficult to "exploit economic opportunities fully".
In its response to his review, the Government said: "Lord Heseltine saw the pursuit of unitary status as being a significant step towards the future he wanted.
"While the Government will not stand in the way of areas that would like to voluntarily adopt this approach where this would unambiguously result in greater efficiencies, the Government believes it would be preferable for authorities not to be distracted by structural change but to focus on coming together to share their operations both across frontline service delivery and back office."
Quizzed whether this opened the way for Exeter to go unitary, Mr Pickles gave a firm: "No."
He has previously argued the city was "too small" and "lacked critical mass" to go it alone.
The Cabinet Minister has also highlighted the warnings issued at the time by one of the most high ranking civil servants in the country over Labour's proposals for the city to break away from Devon.
The then Permanent Secretary Peter Housden was so concerned about the unitary plans on both financial and feasibility grounds, that he demanded a written instruction from the cabinet minister, absolving civil servants from any legal action resulting from the decision.
The controversy was subsequently reignited after Lord Heseltine called for legislation barring unitary authorities to be torn up.
