Dafydd Wigley: 'Misunderstanding'

The issue had been complicated by what the local AM Dafydd Wigley has described as a "misunderstanding" over European rules, although this has now been clarified.

A "furious" Mr Wigley had earlier this month raised concerns in the Welsh Assembly over whether the EU would classify lottery money as public money, which would then debar the tourist board from contributing to the project.

However, as it was not a profit-making project, the AM said he had been told the question did not arise.

However, Assembly Economic Development Minister Andrew Davies could still be asked by the WTB to make a final decision.

Mr Davies said the DTI had clarified the situation, and confirmed that there was no issue in relation to state aid.

Assembly approval

However, the tourist board holds that if funding for a project such as this has a total contribution of more than 50% from public funds, it is against their own rules, and they would have to seek assembly approval.

The WTB will meet to discuss the funding issue on Thursday.

Mr Wigley said the decision was important - not only for the Caernarfon project, but also for other lottery-funded schemes around the UK.

The development at Caernarfon's Victoria Docks is set to host a theatre and cinema, cafes and places for artists to practise and is seen as crucial to the town's regeneration.

Chief Executive of the planners Cwmni Tref Gwynedd Roberts last week admitted he was "in the dark" about the funding difficulties.

He said there were at least four other planned arts projects in Wales which could be left in limbo by any change in the rules.