A THEATRE at the centre of controversy since its opening three years ago has 'stabilised,' a senior official says.

The £14m Gala Theatre in Durham City has had a chequered history that includes the collapse of the management company - with debts of £700,000 - hired to run it .

The size of the subsidy it gets from Durham City Council has also been a bugbear for some council taxpayers.

But for the first time the 500-seat venue could end the financial year slightly below budget.

The Audit Commission has previously highlighted the Gala's financial position as a major issue but now says 'this is no longer the case as the theatre is currently meeting its financial targets.'

The commission's annual audit and inspection letter said the theatre could end the current year £16,500 below the £650,000 earmarked for subsidy.

The theatre required more than £900,000 in its first year and last year needed a £753,000 subsidy compared to the £750,000 budgeted for.

Darlington Borough Council's arts team was brought in last March to run the venue for 12 months for the council and tighten up its operation.

The council is now advertising for a theatre director and a programmer to take over in the next few months.

The council's Liberal Democrat cabinet member for finance, Carol Woods, said: "The Gala is going from strength to strength. It has run all year just under budget and the panto did exceptionally well.

"We are improving the operating systems and putting on the things that people want to see."

She said next year's subsidy "won't be more than now but I don't think it will be substantially less."

The council's executive director, David Marrs, said: "The Gala needed stabilising and we have done that. All of the issues of the past have been sorted and the audience is building. We set ourselves a target of a ten per cent increase on last year's audience figures and we hit that at the end of December."

Mr Marrs said the theatre's management had been strengthened and there was a better understanding of the theatre's customers and what they wanted.

Changes such as the revamped caf and new ticket office were helping, along with innovations such as a trial offering of pre-show meals.

A second cinema screen, part of a new multi-purpose performance area, would enable the theatre to meet demand for 'culturally diverse' films rather than simply blockbusters, he added.