According to Kent County Council the budget had ballooned from an original estimate of £7 million to almost £50 million - a crisis that has resulted in architects Snøhetta and Spence Associates being booted off the project.
The move - which has been condemned by Stephen Spence himself - confirms widespread fears, reported by the AJ in January (AJ 12.01.06), about the feasibility and expense of building the innovative centre in the water off Margate Pier.
The leader of the council, Paul Carter, said: 'The original design for Turner Contemporary was bold and exciting, but a figure of nearly £50 million for the gallery alone - with no guarantees that the cost would not climb further - cannot be borne in part by a local authority acting as protector of the public purse.'
He added: 'We will engage with local people and the businesses of Margate to ensure they play a part in the development of the new scheme and will announce a date for consultation shortly.'
It is understood the council has already appointed a local architect, Cheney Thorpe + Morrison, to look at a new masterplan for the area, including the possibility of moving the Turner Contemporary to a smaller site.
The decision to dump the scheme came as a shock to Spence, who believes the wrangling over ever-increasing costs is little more than a smokescreen.
He said: 'The costs are a red herring. This is not a money thing - this is a high-level political change.
'Carter has made the decision even though we haven't had the approval of the final costs for a short-term political gain.
'We have been selling this dream for five years just for somebody to come along without all of the earlier knowledge - it stinks to be honest.'
He added: 'This has all been done without any of the team's knowledge - including the project director - and has been fuelled by Nuttalls' [the contractor's] inability to pin the costs down.'