THE Fourth Grace will not be finished in time for Liverpool's Capital of Culture year - despite being a key part of the city's winning bid.

Senior sources last night told the Daily Post that even the best-case scenario was to have just a completed exterior with a new Museum of Liverpool Life inside by 2008.

Major parts of the £200m waterfront project - including private offices and apartments - are all unlikely to be finished.

And the Daily Post can reveal that board members of the North West Development Agency - majority owner of the proposed Mann Island site and a potential £40m funder - are split on the merits of the entire project.

The Fourth Grace was a central part of the Capital of Culture bid which Liverpool submitted to the government.

The bid document itself described the scheduled opening of Will Alsop's Cloud design in October 2008 as "perhaps the event of the year".

But last night a senior member of Liverpool's Culture Company board said: "I don't think we've ever said that the Fourth Grace will be completed in 2008.

"We've said that the building will be up and we hope the museum side will be up and running but there is likely to still be a lot of fitting out going on.

"The timetable has already slipped. Everything was meant to be given the go-ahead last month but that is not going to happen until early December.

"The NWDA board has not yet agreed any money apart from development funds.

"There is also a minority of NWDA board members who question the Fourth Grace altogether."

Another member of the Culture Company board gloomily predicted last night: "The 2008 deadline on the Fourth Grace is not going to be met. I think there is a general acceptance of that now. We're probably looking at another 12 months on top."

Last night, Sir Bob Scott, chief executive of the Liverpool Culture Company, said he was "quite calm" about the idea of the Fourth Grace being unfinished in 2008.

He said: "Hopefully quite serious parts of it will be open but I am quite calm about it being unfinished. My view is that, if things are not ready, then they can form part of the legacy of Capital of Culture.

"What we don't want is mud and cranes on the site and I think it is the fitting out inside that would actually not be complete.

"The most important thing for Liverpool is that the project should be committed to and it happens, not that every bit of it should be finished by 2008."

One of the key elements now will be the backing of the NWDA, which may be asked for as much as £40m to match European grants.

A spokeswoman for the agency said: "The NWDA board considered at its last meeting a bid for further pre-development funds for the Fourth Grace.

"That was approved with complete consensus.

"This will enable a more detailed report to be presented on December 12 when final approval for the project will be considered." The Daily Post understands that the NWDA board is reluctant to pledge such a huge amount of public money - £40m would be its single biggest financial commitment - without a watertight business plan demonstrating the economic sustainability of the Fourth Grace.

But council leader Mike Storey was positive last night.

He said: "Final decisions on funding need to be made in the next few weeks. I am very hopeful that the Fourth Grace, a key element of our Capital of Culture bid, will be there for all to see."

Opposition leader Joe Anderson said: "I would be very disappointed if the Cloud or a major part of it wasn't open for business in 2008."

NWDA HAS DIRECT INFLUENCE ON FUNDS OF £1.5bn

THE NWDA is one of nine regional development agencies in England and is sponsored by the Department for Trade and Industry, with direct influence on funds of £1.5bn. Members are:

* Chairman Bryan Gray, the deputy chair of heating company Baxi Group .

* Deputy chair Professor Sir Martin Harris, CBE, DL, vice chancellor of Manchester University.

* Marie Rimmer, leader of St Helens Council and Labour group.

* Leslie Neville Chamberlain CBE, former chief executive of BNFL, now retired.

* John Dunning CBE JP, director of Westmorland Ltd.

* Dr Maureen Williams, founder and chief executive of Merseyside Development Foundation.

* Clive Jeanes OBE, chair of Wigan Borough Partnership.

* Coun Dr Pauleen Lane, civil engineer and lecturer at UMIST.

* Richard Leese CBE, Labour leader of Manchester City Council.

Alan Manning, NW regional secretary of the Trade Unions Congress.

* Dennis Mendoros OBE, MD of Euravia Engineering.

* Robert Johnston, MD of ICT company The Visual Link Ltd.

* Anil Ruia OBE, JP, director of textile company Wrengate.

* Brenda Smith, MD of Granada TV.

* Coun Mike Storey, CBE, leader of Liverpool City Council.