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The Museums, Libraries and Archives Council (MLA) is to retain responsibility for 2011/12 funding decisions, with Arts Council England (ACE) taking on responsibility for decisions with a longer-term impact.
The news comes ahead of the MLA's 2011/12 budget, which is released on 11th February.
Chief executive of Arts Council England Alan Davey said: "Although there are considerably less funds available than in previous years, and we have some tough decisions ahead, there is room for ambition alongside pragmatism.
"I am passionate about the importance of regional museums and libraries to the quality of our country's cultural life and the Arts Council is committed to championing and developing them as a wonderful resource for future generations."
The MLA will be closed by March 2012, with ACE taking on a portion of its responsibilities, including the libraries improvement and development agenda. In December, ACE was allocated a budget of about £46m a year by the Department for Culture, Media and Sport to deliver on the responsibilities previously held by the MLA. The budget for supporting libraries is about £2.6m per year.