The “Wild West” lights display, which has remained unchanged since the Sixties, portrays six men wearing headdresses and dancing around a totem pole. The depiction of the Native Americans has outraged two members of the Chickasaw Nation tribe who wrote a letter of complaint to Blackpool council.
They suggested that the lights paint the Lancashire seaside resort "as a community that supports racism and discrimination”, Lancs Live reported.
The letter added that such “caricatures” can “reinforce racial stereotypes” of the ethnic group.
In response, the Council said it will “explore options” for a new display.
The display, located north of Blackpool Promenade, had been intended to be a “celebration of different cultures”, the council said.
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But it added that it was in “constructive discussions” with those concerned.
Blackpool councillor Tony Williams said “more care and understanding” was required when considering future use of the display.
"I believe this tableau was made in the Sixties when the only images and perception people had of Native Americans could be found in comic books or western movies,” Cllr Williams said.
"Of course that perception was completely wrong and over time we learned through better understanding that in reality people’s perception was greatly distorted.
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"The council claims the tableau is part of a mixed cultural display and there was certainly no intention to offend and I accept this.
“However, I think more care and understanding needs to be taken in considering the placement of this display and those in future illuminations events.”
A spokesman for the council said: “Our officers have been in constructive discussion with two people of Native American origin who raised concerns about the tableau.
“We have explained the background to the historic elements of the Illuminations display and assured them that these were designed and created many years ago and intended to be a celebration of different cultures.
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“Both have accepted that assurance.
“The Illuminations are one of the UK’s most enduring family attractions and we would never do anything intended to cause offence.
“We will, as a matter of course, take on board the comments received and review which features are appropriate for inclusion in next year’s display.
"We have also agreed to explore options for a new tableau that celebrates Native American culture with input from the network based in the UK.”