The Morecambe Sandcastle Festival will be scrapped in 2014.
The annual sandcastle-building event is the only arts and tourism event for the chop this year after sweeping cuts were put on hold.
The Platform in Morecambe will stay open, while cuts to arts organisations like The Dukes theatre, Ludus Dance and Litfest have been avoided in 2014/15.
Lancaster City Council had been expected to make savage savings due to a budget shortfall of £2.3m.
But Coun Eileen Blamire, leader of the council, said: “What was a bleak outlook seems to have changed in the last month.”
She praised council officers for instead saving £1m through behind the scenes “efficiencies”.
But Mark Cullinan, chief executive, warned that these savings had been at the expense of service quality and some council jobs.
The council will carry out a major review of arts and tourism costs over the next year, which could mean further cuts in 2015/16.
There will also be some changes in 2014 in the drive to save money.
Lancaster and Morecambe Visitor Information Centres will have reduced opening times and may no longer open on quieter days.
An original proposal was to close the former tourist info centres on all bank holidays but this was changed after Councillor Ron Sands argued against doing so on “the busiest days of the year”.
Jobs could be lost in the council’s marketing department and the council’s residents’ magazine will only be sent out once a year.
The Sandcastle Festival will be replaced this year by a major outdoor exhibition called Profiling Morecambe Bay.
The city council, run by a Labour-Green coalition cabinet, has cited a shortfall in Government funding for needing to save the money.