Fug on the Tyne

The new £46m Baltic centre is in crisis. Its director doesn't care how few people visit, and now a report asks whether it can survive. By Simon Tait

At a price of £46m, £33m of it from the National Lottery, the iconic art gallery was going to be at least as charismatic as the Guggenheim, making Gateshead the Bilbao of the North. From the way visitors flocked when it finally opened last July, 15 months late, it looked like the former Baltic Flour Mills, now simply Baltic, was well on the way to fulfilling everyone's dreams. Four times as many as expected came in its first month, and the annual projected visitor number of 300,000 was passed sooner than six months after it opened.

So why is an official report now questioning whether the art gallery can survive the deep financial crisis into which it has slumped? The situation has prompted a "strictly private and confidential" letter to the board's chairman, Alan E Smith, from the Arts Council chief, Peter Hewitt, drawing his attention to "issues of major concern to me including insufficient financial control, serious inadequacies in financial procedures, inadequate staffing in the finance function and some problems with top-level management and board supervision."

Hewitt insists on a completely new business plan by March, hinting heavily that future subsidy will depend on it. And although neither the report Hewitt refers to nor his letter explicitly lays the blame, there is no doubt where the buck stops for them: at the door of the director, Sune Nordgren.

"Sune finds the mechanics of financial procedure boring, and what's needed is someone at a high level who is interested in that kind of thing," said a supporter, in his defence. The report sees it rather differently, suggesting that there has been a loss of financial control, with "breaches of regulations" amounting to "financial irregularity". It follows on with: "This could potentially be a disciplinary offence."

To try to bring Baltic back onto the budgetary rails, a high-powered financial whizz is to be imposed on Nordgren on the insistence of Hewitt, rather as happened at the British Museum in the mid-Nineties (though that still failed to deal with the budgetary flounderings of what had itself been a lottery icon 250 years ago).

Appointed in 1998, Nordgren is a 55-year-old Swedish migrant in the world of contemporary art who has been a graphic designer, a publisher, a critic and a roving curator in Europe. His last job was running the Malmo Konsthall, which he turned into a kind of exhibition-hall-cum-artist's-studio.

Last autumn, before the damning report was written, he asked for a pay rise from £55,000 to £70,000 and a contract extension of three years. He was given £60,000 and a contract for two years. A new deputy director was to have been appointed in January, after the resignation of the incumbent, but the search was abandoned in favour of finding the new whizz, who will earn £55,000 and have direct access to the board. Seven short-listed candidates are to be interviewed later this month.

Nordgren's management style is eccentric, to say the least. The report bluntly says: "A breakdown in communication and co-operation has been identified within the management team." A former colleague goes further: "The man has the diplomatic skills of a rhinoceros. He is in a world of his own." Last year, Nordgren lost two key trustees through his uncommunicative style when Doris Saatchi, the former wife of Charles Saatchi (who helped him to compile his first collections of contemporary and modern art), and Andrea Rose, director of visual art for the British Council, resigned. Neither wanted to talk about their reasons, but a close associate said: "They were not happy with the programme, and they were fed up with being humiliated by Sune, who simply ignored them and their advice."

One of the main bones of contention was Nordgren's insistence that he would take no exhibitions from London, despite the presence of an eager audience in the North-east who would be unlikely to have another opportunity of seeing important contemporary shows originating in the big London centres. Nordgren dismissed the London art scene, declaring that his gallery would not be a shrine to Britart, and insisted he would refuse to ship in exhibitions that had already been shown in London. He said those from the capital and visitors to Britain could go to Gateshead.

But his regard for the visiting public has never been great. He told the design magazine Blueprint last year that he didn't mind how few people went to Baltic – an astonishing stance for the accounting officer of a subsidised cultural centre. "I'm not interested in attendance figures," he said. "It's more the politicians and the Arts Council who are interested in those sorts of things. We will never try to popularise what we are doing. On the contrary, actually. We want to make things more complicated."

He announced he wanted a gallery unlike any other publicly funded gallery to be found in this country, one with no collections and operating like the Malmo gallery. "I would like people to think of Baltic as an art factory," he said in one interview. "It is not just another public gallery. It is a manufacturing plant where new ideas will be made."

The attitude may have been warmly applauded by modernist purists, but it has not helped the financial well-being of the Baltic. The thousands of visitors who have enjoyed the stunning views up the Tyne from Baltic's top floor appear not to have stayed to spend money in the bars, restaurants and shop. The projected individual visitor spend of a modest £1.25, the report says, compares with an actual 37p.

And there are questions in the report about Nordgren's own programme budget: "The Baltic director appears to concentrate almost solely on the arts programme, to the detriment of business-plan supervision and development," it says. A major financial blank appears to be Nordgren's £1.5m programme budget, which he failed to produce for the report. And the pre-opening Anish Kapoor installation, seen by only 14,000 people, which was projected as costing £110,000, actually cost nearer £300,000.

Chris Burden, the American artist who created a series of bridges out of Meccano for one of the opening exhibitions, is believed to have been paid £100,000, and the Antony Gormley show Domain Field, due to open in May and involving the sculptor working with 200 local people and making individual casts of them all, is thought to be nudging the £500,000 mark.

Northern Arts, the regional arts council, puts a brave face on the situation, with the chief executive, Andrew Dixon, saying the financial chaos is temporary and a result of the scramble to get Baltic open after a series of delays and the human inundation that followed the postponed opening.

But his optimism must belie an anxiety about the £450m Newcastle/Gateshead bid to be Britain's European Cultural Centre in 2008, with the winner to be announced by the Culture Secretary, Tessa Jowell, in May. At the time Baltic opened, the twin Tyne communities seemed clear favourites on the shortlist of six, with the award-winning Millennium Bridge already opened next to Baltic and the £70m Sage music centre to be inaugurated in 2004.

Since then, the challenge from other contestants, in particular Liverpool and Cardiff, has become stronger, and a perceived failure of what should be the flagship of the North-east bid could prove its undoing.