AN MP last night demanded an investigation into the financial crisis surrounding a £14m theatre, to discover the fate of hundreds of thousands of pounds.

Durham City Labour MP Gerry Steinberg said the "debacle" surrounding the city's flagship Gala Theatre needed to be investigated.

Almost 200 creditors packed a meeting on Tuesday after the theatre's management company collapsed with debts of almost £700,000 - only four months after the venue was opened.

Durham City Council, which owns the theatre, and the two company directors which ran it, have since come in for fierce criticism.

Mr Steinberg said last night: "I certainly think that an investigation will take place and that's obviously necessary because we've got to find out exactly where the money has gone.

"What has this company done with the money because there's a case for the auditors to be looking very carefully at this company?

"I only hope that after this debacle it becomes very much a successful theatre."

But he defended the council for employing Michael Power and Nicholas Rule, whose company, The Entertainment Team (Durham) Ltd, ran the Gala.

"I think the council was right in the first place employing experts for the Gala Theatre because it hadn't the sort of experience in running this," he said.

He also said the taxpayer had paid "virtually nothing" for the project as the money had come from council resources and the National Lottery.

Durham City Council, which is owed £209,000, is among the scores of creditors told earlier this week they were unlikely to get their money.

Mr Power and Mr Rule have blamed the collapse of the company on the late opening of theatre facilities, including its cafZ and bars, and the "disastrous" ticket sales for the opening event featuring pop group Westlife.

Meanwhile, rumours that the District Auditor had launched an investigation into the affair were rejected last night.

But the Audit Commission said the local government financial watchdog would, nevertheless, be monitoring developments.

A commission spokeswoman said: "The council has kept us informed about the situation.