THE Government last night pledged an extra £5m towards Liverpool's Capital of Culture celebrations.

The announcement comes in the same month that both Tony Blair and his culture secretary, Tessa Jowell, said the city would get no further backing towards 2008.

The U-turn, announced by the Arts Council England, North West, virtually doubles the Government cash Liverpool is to receive.

But city councillors last night vowed to continue to lobby the Labour Government for more money, saying there was still a massive shortfall to be made up.

Cllr Warren Bradley, Liverpool's Executive Member for Culture, said last night: "We are going to keep pushing them for more money. For the year alone we have planned to spend £60m."

The new grant will join three previous grants in supporting the city and arts organisations on Mersey-side. They were:

* £5m which the Department of Culture Media and Sport earmarked in its funding settlement to the Arts Council last December;

* £250,000 for a friendship project;

* £100,000 to pay for a presentation. With the new grant, the total cash from central government now stands at £10,350,000.

In addition, three private companies, Hill Dickinson, United Utilities and Radio City, have each pledged £2m towards the fund, with at least two more high-profile companies expected to follow in the next month.

The Government's decision contradicts a statement last week from Culture Secretary Tessa Jowell.

Ms Jowell said: "It was made quite clear from the outset of the competition that bidding cities would have to meet the costs of fulfilling their commitments and that there should be no assumption of government funding."

Liverpool's extra £5m will be used to support the Culture Company's work in producing the international festival in 2008, and in supporting the development of the arts in the city over the coming three years.

Last night Cllr Bradley said: "It's not great, but it's a start. It's about delivering the best Capital of Culture ever. We have fought hard for this money.

"Support will need to grow from all sectors if we are to make the best possible contribution and create the impact we all want to make in 2008."

"Hopefully central government will look upon Liverpool more favourably after the Olympic bid."

Two weeks ago, the Prime Minister told the Daily Post London's bid for the 2012 Olympics should not be compared with Capital of Culture.

He said: "The basis on which the Capital of Culture is decided is very different from the Olympics.

"The only way you can bid for the Olympics is if the Government provides significant monetary guarantees."

Jason Harborow, chief operating officer for Liverpool Culture Company, gave a cautious welcome to the money last night.

He said: "We need as much money as possible from both the public and the private sectors. It is in the interests of not just this city but the North West and the country as a whole. "What is invested will be returned tenfold."

Michael Eakin, executive director of Arts Council England, North West said: "On Merseyside, in addition to our funding for regularly funded organisations, which will exceed £7m by 2007-8, we are confirming £5m of additional funds which will enable us to support preparations for Liverpool, European Capital of Culture 2008.

"Liverpool, European Capital of Culture 2008 will celebrate the most culturally dynamic region in England. This announcement is a reflection of our strong commitment in supporting Liverpool and investing in the future of the arts on Merseyside and across the North West.

"We will be working with the Culture Company over the coming months, to determine how this money should be most effectively used to ensure that the European Capital of Culture year is a major success for Liverpool and for the UK."

Two years of financial ups and downs since Liverpool was awarded the 2008 title

* June 4, 2003: Liverpool wins title of European Capital of Culture 2008.

* September 3, 2004: Capital of Culture's first backer comes forward. City law firm Hill Dickinson pledges £2m, comprising a cash donation and free legal advice. Two more of the proposed 12 backers have since been announced, with more to follow in a month from now.

* December, 2004: The Department of Culture Media and Sport earmarks the first £5m for 2008. City officials say it is simply not enough.

* March 3, 2005: It is revealed that 2005's bill for Capital of Culture stands at almost £9m, with a total bill of £30m shouldered by Liverpool taxpayers. Documents, obtained using the new Freedom of Information Act, show salaries alone cost more than £2m.

* March 9, 2005: Prime Minister Tony Blair tells the Daily Post Liverpool must pay its Capital of Culture bill without Government help, insisting the rules were clear from the start.

* March 14, 2005: Culture Secretary Tessa Jowell says ministers will not guarantee any more money towards capital of culture. Council leader Mike Storey says: "I am disappointed. London got £12m just for bidding for the Olympic games."

* March 19, 2005: Liverpool's arts organisations criticize the Arts Council funding they are each to receive in 2008. The overall grant of £22.5m is just 7.7% up on 2005.