The Returned and Services League is pushing for the federal government to match a $500m upgrade for the Australian War Memorial with spending on veterans’ welfare services amid a backlash against the lavish renovations.

The prime minister, Scott Morrison, said on Thursday that the war memorial would be redeveloped to increase visitor space by 10,000 square metres, characterising the site as the “soul of the nation”.

“It is sacred to us all,” he told reporters in Canberra. “It transcends politics, it transcends all of us.”

James Brown, the president of RSL New South Wales, said while it was great the government wanted to tell the story of veterans, his organisation desperately needed more support to keep them alive.

“We had 85 veteran suicides last year, we need to get that number down,” he told Guardian Australia.

Brown said it would cost $2m to train 10% of the RSL’s 200,000 members nationally in suicide prevention and $50m a year could pay for 500 fulltime mental health experts.

Brown said Morrison had agreed to meet with the RSL to discuss new funding initiatives.

Australia Defence Association spokesman Neil James rejected counter-arguments that the money would be better spent on veterans’ welfare.

“You wouldn’t get the extra money spent on veterans, it just wouldn’t be spent at all,” he told Guardian Australia. “It’s a mute argument, quite frankly.”

But there was widespread disquiet at the war memorial funding, which follows the spending of $100m on the Villers-Bretonneux interactive museum in north-eastern France and a $31m renovation of the memorial’s first world war gallery in 2012.

The artistic community and historians said the spending commitments contrasted with the low levels of funding given to other cultural institutions.

The National Museum of Australia, National Portrait Gallery, Museum of Australian Democracy, National Film and Sound Archive, National Gallery of Australia and the National Library have been forced to find savings and cut jobs in recent years.

According to a Fairfax Media report, the National Gallery’s funding woes have been so bad that gallery staff have to scramble to place buckets under ceiling leaks when it rains.

The National Gallery received a 0.5% funding cut in the May federal budget but received $16m for a building upgrade.

The budget also saw 12 jobs cut from the library despite a 7% funding increase and 10 positions scrapped from the archives, which lost $1.8m over the next five years.

The National Association for Visual Arts executive director, Esther Anatolitis, said the scale of the investment in the war memorial was alarming in the context of the pressing need of other institutions.

“Australia’s national cultural institutions in Canberra are not just the custodians of priceless collections but play an important civic role in the way we understand ourselves,” she told Guardian Australia. “We’re risking being negligent with our national collections.”

Anatolitis is concerned the increased war memorial exhibition space of military equipment will turn war into a “spectacle” rather than present a sensitive and rigorous presentation of historic and contemporary conflict.

Historian and Macquarie University associate professor Michelle Arrow is also unimpressed.

“I don’t think you can understand Australian history by only looking at military history,” she told the Guardian Australia. “In a perfect world all these institutions would be able to expand, but in a constrained funding envelop I don’t see why all of our national cultural institutions should have their funding cut while the war memorial gets ever more funding.”

Dr Carolyn Holbrook – the author of ANZAC: The Unauthorised Biography – said the fact Labor has supported the renovation shows they are “terrified of being wedged, called un-Australian or accused of being unpatriotic”.

“It isn’t as if the war memorial isn’t already very well-funded,” she said. “It’s doing a very good job – it’s known as one of the best memorials in the world.”

Holbrook said Australia must be “vigilant” that it celebrates benign values like “mateship” but does not elevate military campaigns and legends in a way that glorifies war.

“The war memorial advertises itself with the tag line ‘every nation has its story – this is ours’. It is important to a lot of Australians but there are many other stories Australians are interested in.”

Painter John Bell said he had no beef against the war memorial per se, however he didn’t see justification for such a major expansion. He said war memorials should honour the fallen but he was uncomfortable about celebrating war paraphernalia.

“Anything that smacks of glorifying war and the military solution to any problems in the world I don’t support,” he said.

The war memorial’s director, Brendan Nelson, said today’s servicemen and women are returning home to a country that has no idea what they have done or the sacrifices they have made.

“Their story must be told to help them understand the impact service has had on them, to help them transition to life back home, and to heal,” he told reporters in Canberra.

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