The project was initially costed at £7m and the council is now planning to build the gallery nearby, on dry land, and has promised to come up with firm proposals by mid-April.

The council took the decision without involving Victoria Pomery, the gallery's director, who said that she and her team 'weren't any part in the decision-making process'. Referring to the new proposals, she said: 'I hope there isn't going to be lots of compromise. We still need to be ambitious, and the discussions over the next few months are going to be critical.'

Councillor Michael Hill, the cabinet member for community services, said: 'Victoria Pomery is responsible for the artistic development of the gallery and preliminary programmes. The project director, Mike Evans, was intimately involved in the decision-making process.'

He added: 'It was always going to be ambitious and challenging to put a building in the sea, but I don't accept that it [the new project] can't be an exciting building.'

Stephen Spence, the architect behind the original plans, called the council's decision a 'knee-jerk reaction', blaming the decision on contractor Edmund Nuttall's 'inability to pin the costs and the project down'. Nuttall declined to comment.

Scepticism about the project has been rife since the plans were first made public, with local wags referring to it as the Turner Temporary. This feeling was further fuelled when a steel obelisk, designed to test the feasibility of the construction, was erected at the site only to be swept away by the sea after two days in the water.

Rebecca Smith, the editor of the Thanet Times, said: 'There is a big feeling in Thanet of 'I told you so', but the mood seems to be that at least we are still getting something, and it might even be better in the long-run.'

Costs rose from an original budget of £7m to £25m in October 2004, reaching £29.5m in 2005 and £48m earlier this year. The new plans for the gallery are being costed at £12m. So far, the council has spent more than £4.5m on the project.

Both the South East England Development Agency (Seeda) and Arts Council England (Ace) pledged money to the gallery, and were standing by the council's change of heart.

Seeda's contribution is worth £4m, while Ace spent £80,000 on revenue funding in 2004/05, with a further £370,000 earmarked for 2006/07 and £4.1m in capital funding ringfenced for when construction begins.

Patrick Steel