NATIONAL museums and galleries celebrated but theatres were despondent yesterday as the Government announced a tough spending round for the arts.

Grants for 2006-07 and 2007-08 will give above inflation increases for institutions such as the Tate and the National Gallery, but Arts Council England, which funds bodies such as the Royal Opera House and fringe theatres, faces a loss of £34 million in real terms.

Regional museums received a 50 per cent funding boost, but grants fell short of expectations by up to £38 million.

Arts Council England attacked Tessa Jowell, the Culture Secretary, and Gordon Brown, the Chancellor, for freezing its funding to the same level as its 2005 grant.

Sir Christopher Frayling, its chairman, said that the Government’s decision to alternate between reasonable increases in one spending round and revenue freezes the next was damaging to the arts. “It means we are back to the situation we had in the early 1990s of robbing Peter to pay Paul,” he said. “We can’t engage in any serious planning. The idea of awarding funds by Buggins’s turn is fine in accountancy, but in human terms it doesn’t work.”

Peter Hewitt, the council’s chief executive, said that the cuts would have a noticeable effect on arts projects. “We have a choice between supporting mainstream arts organisations and ignoring new and more diverse projects, or vice versa,” he said. “What is the point of giving £5 million one spending round and taking away £34 million the next? How are we supposed to plan for a stable future?”

Michael Boyd, artistic director of the Royal Shakespeare Company, said that the Government was making a mistake after seven years of investment. “It is no good planting seedlings, then depriving them of water,” he said.

Tessa Jowell warned arts institutions that they would have to make “efficiency savings” to make up for the funding shortfall. “It is all the more important — when funding is tight — that we get the best possible value out of every public pound we spend,” she said.

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