One of the UK's state-supported regional cinemas has slammed proposals from the Government-backed film body the Film Council to create a centrally run art-house circuit as an "insult".

The Broadway Cinema in Nottingham, part of the UK's regional film theatre circuit, this week issued a statement saying the proposal would drive up costs, cause local redundancies and "deliver less to our audiences". The council proposes spending National Lottery cash worth $21.1m (£15m) on a national chain run from a central head office.

"It is an insult to suggest that we, in Nottingham, are not capable of running our own operation," said Broadway director Laraine Porter. "Why should we spend money supporting London-based companies when we can get a better and more economical service here in Nottingham'"

The council has said that funding for the regional film theatres - the council oversees $2.8m (£2m) a year for the circuit - is separate to the $21.1m in its proposal. But it has acknowledged that the proposed network could subsume the existing circuit and has held talks with the cinemas over how the scheme would be implemented.

The London-based body, which declined to comment, is to finalise its policy in April after consulting the industry on three proposals for boosting the art-house sector - including investing in facilities for people with sensory disabilities and a one-off grant that would handed out after an open bid.

Many in the exhibition sector have already dismissed any need for new screens, but the $21.1m has to be spent on building or improving cinemas as it comes via the Arts Council of England's funds for capital projects.

But Broadway warned that the Council's proposed centralisation "would effectively sever Broadway's relationships with local communities, charities, schools, colleges, universities, and businesses". Along with education programmes and winning an award for its services for people with disabilities and the elderly, Broadway has showcased the films of local filmmaker Shane Meadows, acclaimed for his feature debut 24:7, and attracted overseas filmmakers such as Quentin Tarantino for special events.

"We believe the nature of the work at Broadway can only be effective and meet the requirements of local audiences, if it is programmed and marketed at a local level," the cinema said.