A COUNCIL has denied that subsidising its flagship theatre will cost £1.5m of public money.

Durham City Council is running the £14m Gala Theatre, in Durham, after the firm it appointed to manage the venue collapsed with £700,000 debts, months after the theatre opened last year.

The theatre is part of the Millennium City development project, which includes the Clayport Library and offices for Durham Citizens Advice Bureau and Labour MP Gerry Steinberg, and cost more than £1m extra than was planned.

Councillors are understood to have considered a report which suggested that the entire complex would need £1.5m in the next year.

But the Labour-run council says the theatre's subsidy will be a fraction of that.

A spokeswoman said the figure of £1.5m was "grossly inflated" by an internal accounting transaction.

"We have to charge ourselves well over £1m as a capital funding charge but we pay it to ourselves, therefore the result is nil.

"The subsidy which is payable to the Gala is no more than that payable to any other small theatre in the North-East and is a fraction of the cost quoted.''

Liberal Democrat group leader Sue Pitts said the theatre's subsidy "is not one that can be sustained".

She said: We have to get a realistic budget we can live within. The council subsidises other services and the theatre is a huge asset economically and culturally.''

The audit letter on the council's 2001/2002 accounts said there were "significant additional revenue costs'' for the theatre and that the council planned to use some of its reserves.