It's not uncommon when undertaking capital projects in museums and galleries to come up against problems with listed building consent. Altering the internal or external structure of a building that is possibly a local icon, and has stood for many years in the same spot, usually incurs a more than normal amount of form-filling.

But in the case of the Stanley Spencer Gallery in Cookham, Berkshire, the problem was not the building itself, a 19th-century Wesleyan Methodist Chapel. The hitch occurred when the plans included extending an exterior wall to provide education and study space: in the way of the wall was a red telephone box - and it was listed.

Negotiations with British Telecom led to an agreement to shift the box a few metres to the left, allowing the extension to go ahead and the listed building to be saved.

The Stanley Spencer Gallery claims as its unique selling point that it is the only gallery in the UK dedicated to a single artist in the very place with which he had such a close association: Spencer was born in the village and lived there most of his life.

When he won a place at the Slade School of Fine Art in London he insisted on commuting back to the village every night, and his eulogisation of the place earned him the nickname 'Cookham' among his fellow pupils.

Even on a very cold winter's day Cookham displays a lost world charm that recently won it a top-ten place in the Landmarks of Britain book by Clive Aslet. Listed among Cookham's attractions was the gallery; much to the edification of its staff of volunteers.

The gallery has the largest collection of the artist's paintings and drawings outside of the Tate. Despite its perfect fit as a local gallery displaying work of local settings by a local artist in the space where he regularly used to worship with his family, the collection also has an international reputation. Ten per cent of its 14,000 annual visitors are from abroad and the gallery regularly loans work to other institutions in the UK and internationally.

The collection has been amassed through donation, bequest and long-term loan. It is still added to, courtesy of an acquisition budget that would be the envy of most local authority museums. Even so, it is no longer able to acquire paintings and has to restrict its purchases to drawings because they are cheaper.

The gallery was recently awarded £882,500 by the Heritage Lottery Fund for what it rather self-evidently calls its Improvement Project. According to Richard Hurley, the chairman of the trustees, the plan is to improve conservation and access to the gallery. And it is needed.

Although a perfect setting for the work of the local boy, the church hall is tiny and in need of the sort of TV-style makeover that manages to find, with a bit of clever storage and some judicious sorting out, acres more room in the smallest of homes.

The exhibition changes twice a year, but the limited wall space means only about half of the collection is on display at any one time. Access to what is hanging is hampered by the waist-high wooden chests that line most of the walls and hold the stored paintings.

Add to this a small shop and welcome desk, a library, an education area and a couple of display cases of Spencer-related memorabilia and you can see why size matters here.

Space constraints and brown hessian aside, Stanley's work is intriguing and engaging. The gallery is dominated by one of Spencer's unfinished works: Christ Preaching at Cookham Regatta and at first the unpainted white areas overshadow the painted areas and its incompleteness throws the viewer off-balance.

But step up to the canvas and you see a fantastic example of the artistic process: sketches cover the whole surface and Spencer's methodical painting-by-numbers approach is revealed.

Dotted around the gallery are a number of black and white photographs of Spencer at work; teetering atop a stool, which is itself on top of a table, to finish one of his large canvasses, or painting at his easel in the village while a small boy gazes curiously on.

These and the precariously suspended pram, which he used to wheel his equipment around in, help to flesh out Spencer the man. The staff has also collected oral history from locals and acquaintances, which is available to listen to in the gallery.

The redevelopment includes an extension to provide a dedicated education space, a small mezzanine floor for extra storage, as well as improved staff and visitor facilities.

The gallery will be decorated and relit, and the collection will be rehung with hopefully more works on the walls. Hurley says the intention is to retain the original features of the chapel - you get the impression that Spencer would have approved.

www.stanleyspencer.org.uk