First Tate sale in 50 years?

It would mean selling works by living artists such as David Hockney or Sir Anthony Caro with the money used to buy other pieces by the same artists.

The last Hockney the Tate bought, Tea Painting In An Illusionistic Style, dates from 1961 and is worth £4million. The gallery has nothing by him from later than 1977.

Tate director Sir Nicholas Serota has complained how the Tate is constantly offered works that it cannot afford to buy.

He said: "The public expects major British artists to be represented properly in the Tate collections, but we are unable to do that." The move would lead to a new row over funding for art galleries. There are strict rules over what Britain's museums and galleries are allowed to do with their works. But a potential loophole has emerged, because galleries are able to sell or dispose of works under the 1992 Museums and Galleries Act if an item is "unsuitable for retention".

The Tate believes that selling works to upgrade their collection would be permitted. However this interpretation of the law could be challenged.

It is understood that the Tate has discussed with sculptor Sir Anthony Caro selling some of the 18 pieces it has by him, which include the £1million Night Movements. The proceeds would then go towards buying smaller table sculptures by Sir Anthony, which are currently lacking in the collection.

It is understood that many modern artists are keen to support the idea to sell because they want their best work to be on show to the public. Damien Hirst, for instance, is not well represented by the Tate because much of his work has been bought by Charles Saatchi.

Sir Nicholas told The Art Newspaper: "Sometimes we find they [artists] are not represented by the best examples of their work."

The gallery has ruled out selling works by famous names such as Turner in order to buy modern art.