The Duchess of Northumberland last night vowed to complete the final stage of her Alnwick Garden project, despite having an application for a £25m lottery grant knocked back.

The Garden was one of 76 projects applying for a Living Landmark grant from the Big Lottery Fund - but yesterday it failed to make the shortlist of 30.

The Duchess was "upset" by the announcement but she remained optimistic and was as committed as ever to completing the third and final phase of her vision.

This will involve building a further four gardens, an orchard area, an ice-skating rink, a bridge between the main car park and the Garden, as well as a £5m play area underneath the tree house.

There are also plans to landscape the pond and add a £2m lighting system.

The garden's fundraising manager Elisabeth [corr] Smith said last night the project was a "victim of its own success".

She said the funding committee had refused the grant, because they argued the project was already up and running, and a third phase would not add much value.

The Duchess said: "I am as optimistic as ever. Of course, it is disappointing and the last 11 years have been a challenge, but we have faced hurdles like this before.

"We have got this far without a penny of Lottery money and we will just carry on. I was upset at the news and find it hard to understand why the Lottery would not want to support the Alnwick Garden. It is a dream project in an area of the UK which has not received Big Lottery money funding. The garden is doing great things for people, who live in Northumberland and the North-East."

Ms Smith said the Garden could have been completed by December, 2008, with Lottery funding, but the finish date could now be pushed back by up to two years. She said: "The third phase will add a great deal to the garden. The extra lighting would ensure visitors could enjoy the garden, no matter what the season."

Work on the first phase of the 40-acre Alnwick Garden began in 1996 and was completed by October, 2001. It cost £9.3m, most of which was paid for by the Duke of Northumberland, with an extra £500,000 coming from EC funding.

The second phase, which was completed in January, 2005, cost a further £21m and was funded from private, regional and European sources.

Page 2: Healthy bid for extra funding