Plans for the development of a new £80m entertainment venue in Leeds, West Yorkshire, have been handed a boost after the government approved the use of public cash to help finance the scheme.

The Department for Business, Innovation and Skills (BIS) has paved the way for regional development agency, Yorkshire Forward, to invest nearly £10m towards the 12,500-seat Leeds Arena project, which is scheduled for completion in November 2012. Initial designs for the interior of the new complex, which will be operated by SMG Europe as part of a 25-year lease agreement, include a two-tier seating bowl layout that will see the furthest seats located 68m (223ft) from the stage.

Business minister Pat McFadden said: "This investment in a landmark development for Leeds will help the city secure hundreds of jobs. "I am grateful to Yorkshire Forward for the hard work put into the proposal to ensure their investment achieves the best possible benefit to the city and value for money for taxpayers. I wish the project every success for the future."

In October, Leeds City Council vowed to press ahead with the Leeds Arena development after the government called for more work to be done on the project's business case, and has now welcomed the decision to approve the use of public funding. Council leader Andrew Carter said: "We said all along that we would continue with the arena project with or without the funding, but this makes it a great deal easier and we're extremely grateful for that.

"It is going to be a very successful venture and a massive asset not just for the city of Leeds but to the whole of the city region. It will mean that the three million people who live in the Leeds City region will have a music venue to visit without having to go to Manchester or Sheffield." However, the operator of an arena in nearby Sheffield - Sheffield International Venues (SIV) - has slammed the government's decision on the grounds that it threatens the long-term future of the existing facility.

SIV chief executive Steve Brailey said: "It is a totally inappropriate use of Yorkshire Forward's money. They should not be using public money to invest in a leisure venue in another nearby part of our region that will inevitably have a detrimental effect on the business of the Sheffield Arena. "It is particularly disappointing as the announcement comes in the same week as the pre-budget report, during which the government pledged to reduce spending, yet they see no problem with using tax payer's money to support this project."