The council channels government funding to more than 11,000 arts organisations across England, most of which provide activities for young people.
Its funding until 2008 is aligned to targets set by the Treasury and the Department for Culture, Media and Sport to increase the number of over-16s from disadvantaged groups participating in arts activities and attending arts events at least twice a year.
The council says the definition of "arts opportunities" given in the targets is too narrow and could limit its freedom to direct funding where it is needed.
A spokesman for the council said: "This is problematic for young people, because a lot of the arts activities included are the kind that people go for in later life."
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