YORK Theatre Royal's subsidy from City of York Council could be cut, following the authority's decision to raise council tax by only five per cent.

The council is looking to save £20,000 from the £360,000 currently given in financial support to external arts organisations.

Of the £360,000, more than £310,000 goes to the Theatre Royal, and so the theatre seems likely to see a decline in the amount it receives under a new three-year funding agreement.

Council leisure bosses say they are in negotiations with the theatre, but hope that it will be helped to ride any shortfall by considerable VAT savings from the past year.

Damian Cruden, the theatre's artistic director, said he was disappointed that there should be any cut in arts funding for the city and, out of principle, opposed any such move.

"We are currently in discussion with council officers regarding the theatre's funding and remain confident that together we will endeavour to maintain current levels of provision.

"However, it is sad to note that it is the arts that will bear a substantial reduction in its already limited funding."

A theatre spokesman said that it had a £2.5 million turnover, with 35 per cent of income coming from grant support, primarily from the council and the Arts Council.

He said: "City of York Council funding was frozen in 2004/5. With inflation at 2.5 per cent to three per cent, this has resulted in a reduction of grant support in real terms and has had a significant impact this year. Any further freeze or indeed any cut will necessitate a matched reduction in activity."

He said, with other performing and live arts organisations, the Theatre Royal had helped to generate a spend of £11.4 million into the York economy.

Meanwhile, Coun Keith Orrell, the council's executive member for leisure, has revealed that much of the leisure budget savings elsewhere will be met by efficiency savings on staff costs.

He said an investment in York's parks and open spaces would continue, as would the big increase in the school holiday programme which was launched last year.

Resources had also been earmarked to improve and maintain the Zoo Skatepark at Foss Bank which, he said, was a valued facility for young people.

Updated: 10:16 Wednesday, January 12, 2005