Southwark's planning committee approved the ambitious scheme on Tuesday night despite an eleventh-hour objection from IPC Media, the publishing firm moving into the Blue Fin Building on Southwark Street.
The 76-metre, 12-storey extension will be built at the south-west corner of the former Bankside Power Station. The extension has been designed by Herzog and de Meuron, the same architects responsible for the award-winning transformation of Giles Gilbert Scott's power station into Tate Modern.
As well as providing significant new gallery space for the display of works from Tate's collection, it will boast education facilities, two shops and six catering outlets.
Tate says that it needs the extension because of the huge success of the art gallery since it opened at Bankside in 2000. Tate Modern was designed to handle 1.8 million visitors a year but last year received 4.9 million visitors, causing overcrowding and putting a strain on visitor facilities.
Tate director Sir Nicholas Serota told the planning committee that the extension would "turn the building around" to look towards Southwark: "It will no longer be a building that relates only to the Thames".
The expanded Tate Modern is projected to draw another 1 million visitors to Bankside each year. It is expected to lead to the creation of more than 300 jobs in addition to the 565 currently employed at Tate Modern.
A key change for local residents and workers will be the creation of a new north-south pedestrian link across the Turbine Hall bridge, with public access for at least 12 hours a day. Sir Nicholas told councillors that this new link would serve to break "the huge block that Tate Modern currently represents".
The space to the south of Tate Modern will become Tate Square, a new forecourt and gathering space with terraced seats.
Objectors to the scheme included the Twentieth Century Society which criticised the "dominant and overpowering structure" and – in a personal capacity – the society's chairman, Professor Gavin Stamp, who lamented the demolition of the "particularly fine brickwork" on the south elevation and the loss of the current symmetry of the gallery.
In a strongly worded objection, Prof Stamp described the plans as "pretentious, excessively domineering and ill-thought-out".
Mr Bullock told councillors that his client had been in discussion with Tate for some time but felt that their concerns had not been taken on board. He listed IPC's objections which included overlooking and loss of privacy, the creation of an "enclosed and oppressive environment" at the corner of Sumner Street and Holland Street and traffic disruption from deliveries to the gallery.
"Overall we will end up with a building which I think will be a real credit to Southwark and a landmark in London, and a very fine example of Herzog and de Meuron's work."
Work on the extension is expected to start in September 2008 to allow for the new building to be open by 2012.
It is expected that plans for 'Tate Modern 3', likely to be occupied by another cultural institution such as the Design Museum or BFI, will be brought forward for the land to the south-east of the former power station building.
• Proposed Section 106 planning obligations for the Tate extension include the setting up of a new Southwark Tourist Information Centre within or close to the Tate complex. Southwark's TIC left its home at Vinopolis last year and currently operates from a small counter at Tate Modern.
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