It was announced last month that Ô£675 million of Lottery funding would be diverted from the arts in order to pay for the Olympics, the paper reported. As a result, during the 2007-08 funding year Ô£54 million will be awarded to the Arts Council instead of the Ô£83 million allocated for the current financial year.

The Arts Council has not yet formally announced the cuts, but will reportedly soon adjust its website to explain stricter criteria for applications for funding, including new rules stipulating that all projects must start and finish in the year in which money is awarded.

The Guardian quotes Arts Council spokesperson Louise Wylie as saying, "A reduction in funds will mean that some applications will be rejected. It is not something we want, but something the Arts Council has to deal with. It is regrettable, but the climate in which we operate has changed. On the positive side there is still Ô£54 million available to be distributed through open application."

The Arts Council of England, founded sixty years ago, is the national development agency for the arts in England; it distributes money from the government and from Great Britain's National Lottery.