Should the state pay pounds 3/4m for this?

Does a small gallery in the Lake District have the right to a large lottery grant to buy a painting by a "modern Old Master" such as Lucian Freud?

That was the question the art world was asking yesterday as the Abbot Hall Art Gallery fought to raise the money to buy Portrait on Grey Cover, a powerful oil of a woman lying on a bed, by the Berlin-born artist.

Yesterday, it had raised only one-third of its pounds 750,000 price, but with the original deadline for payment of midnight last night extended at the last minute to Monday night, there was glimmer of hope.

However, that will depend on whether the lottery distribution bodies can be persuaded to change their rules on the purchase of modern art in what has clearly emerged as an exceptional case.

Portrait on Grey Cover is currently on show at an exhibition at the New York gallery owned by Freud's dealer, Bill Acquavella, who has at least two other collectors ready to snap it up.

The oil had previously been included, hot off the canvas, in the Kendal gallery's summer retrospective of Freud, which had 26,000 visitors.

When it applied to the Heritage Lottery Fund for a grant towards the purchase price, the gallery, an independent charitable trust, was told it could not qualify because the painting was less than 20 years old.

The HLF sent it to the Arts Council's lottery fund. But it turned out that the Arts Council could only give grants for new commissions. The Freud painting, although just completed, fell between the two stools.

The HLF protested yesterday that its trustees had felt obliged to set the 20-year rule to prevent the purchase of artworks which had not been validated by the test of time.

But Edward King, director of Abbot Hall, which owns a major Ben Nicholson painting and a collection of George Romney paintings, was furious.

"The 20-year figure seems completely arbitrary. They should look at each grant on its own merit," he said.

"Everyone acknowledges Freud is a leading painter of today. It's terribly important that regional galleries and museums are able to build up their collections if they are to attract visitors."

Ironically, it was a 1943 painting by the reclusive grandson of Sigmund Freud which attracted the first export stop put on a work by a living artist two years ago, when its owner applied to take it out of Britain.

The Tate and Chatsworth House used the delay to raise the pounds 515,812 asking price for The Painter's Room, which depicts a zebra's head, palm and shabby sofa. But the owner decided not to sell. It is now in a bank vault.

That controversy raised the question of whether Freud's work would be less likely to find buyers if penalised by regulations which can prevent the export of artworks over 50 years old considered vital to the nation.

Now, it appears, Freud is the victim of more bureaucracy, with lottery funding forbidden from going to an artist considered by many to be one of the greatest alive, for fear his work will not stand the test of time - even though it has done so for the last half-century.