BURNLEY Youth Theatre has shelved plans to build a £3 million arts centre - and will now press ahead with a more modest £500,000 scheme.

The news comes as council chief executive Roger Ellis told councillors the theatre had been extremely badly treated by the National Lottery fund which had rejected its applications for cash funding.

A report to the policy committee says that although there had been strenuous efforts to challenge the rejection by the National Arts Council of lottery funding, there was no longer much hope of this.

The theatre was now pursuing a "lower cost option" using industrialised building systems and there was an opportunity of phased development of the new project with limited lottery funding from the North West Arts Council, which had always supported the theatre's bid, councillors heard.

The committee agreed to back the new bid by providing £5,000 in staff costs for outline drawings and costings for the project.

Councillors heard that more work on detailed designs would have to take place were funds to be awarded later and a further report would be made to the committee about the council's possible involvement.

Members were told that after the Arts Council encouraged the Youth Theatre to spend its money on a bid, it then delayed the project for several years during which time the lottery money available was reduced and ran out.

Burnley MP Peter Pike said the theatre had had an "appalling raw deal" in having its lottery bid rejected.

Members of the theatre were shocked and dismayed when they learned their plans for a £3million arts centre had been rejected - again. The Youth Theatre, which celebrated its 25th anniversary last year, had applied for £450,000 to develop working drawings for the theatre, but the Arts Council would only permit the theatre to bid for £70,000 - then it rejected that application.

The building at Queen's Park Road was only a temporary wooden structure when it was built. Now it leaks and the walls are caving in.

The theatre spent more than two years working on lottery bid applications, each time providing more information and modifying plans to meet the Arts Council's requirements.

Converted for the new archive on 14 July 2000. Some images and formatting may have been lost in the conversion.