A MULTIMILLION pound plan to revitalise the Scottish National Portrait Gallery has been plunged into chaos after claims that officials bungled an application for lottery cash.

A bid for £5m of Lotto money was formally withdrawn after serious problems with the application emerged and the National Galleries of Scotland will have to wait until next spring to resubmit.

But fears are growing that the fiasco could put the entire £16m refurbishment project at risk. The incoming head of the National Galleries of Scotland is believed to be unhappy with the scheme and could take the chance to scrap it altogether.

The 120-year-old, neo-Gothic, red sandstone gallery in Edinburgh's Queen Street is one of the city's most impressive buildings.

But it has barely been altered since opening, has an old-fashioned and visitor-unfriendly layout and is considered by many to be in desperate need of a facelift.

It was hoped the lottery money would finance a third of the cost of the redevelopment plan. Another £5m was to come from the Scottish Executive and the rest of the money would be raised privately.

It was planned that the gallery would close down for renovation in 2007 ready for a grand opening by the end of 2008. But that timetable is now in turmoil after the application was criticised for saying too little about how the gallery intended to attract more people in return for such a substantial injection of public money. It is understood managers at the Heritage Lottery Fund, sensitive to allegations of 'elitism', particularly wanted to see proposals for attracting greater numbers of people from lower-income groups and less 'arty' sections of society.

Colin McLean, the Heritage Lottery Fund's manager for Scotland

said: "At the moment we don't have a live bid to talk about. We did receive an application from them earlier this year but that has now been withdrawn and will be resubmitted in the spring."

James Holloway, director of the Portrait Gallery, said:

"We are beefing up some aspects of the application: not the vision, which they like very much, but they want to know about audience development and things like that. We have a great project but it's just about getting the material right."

An insider close to the bid process explained: "There was nothing in the application about growing the audience. There was simply an assumption that because it was from the Portrait Gallery it was all going to go through as a matter of course. It's been a bit of a shock."

In addition to question marks over the timetable, the delay calls the whole future of the project into question because of a change in personnel at the top of the National Galleries of Scotland.

Next March will see the outgoing director, Sir Timothy Clifford, replaced by John Leighton - currently at the Van Gogh Museum in Amsterdam. Insiders believe Leighton may favour an expansion of the Gallery of Modern Art, which could cost as much as £100m.

In August, a report went to the board of trustees which said the Queen Street building was no longer fit to be an active public gallery and had to be improved to attract a new generation of visitors.

Currently, 40% of the building's floor space is used for storage and offices rather than displaying works of art.

The building's one small lift is unlikely meet new disabled access law requirements.

Despite its failure to keep up and be visitor-friendly, the gallery contains a number of priceless works, including Allan Ramsay's portrait of the philosopher David Hume, Alexander Nasmyth's portrait of Robert Burns, and Sir Henry Raeburn's Sir Walter Scott.

Scotland on Sunday art critic Iain Gale was aghast at news of the delay.

He said: "I'm blown away by this. I can't believe that the application was anything other than exceptionally thorough.

"One of James Holloway's characteristics is that he is thorough. I wonder whether the rejection was more symptomatic of the form-filling mentality of today, which focuses too much on crossing the t's and dotting the i's."

A Scottish Executive spokesman said the delay would not affect the scheme's eligibility for government cash.