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Jonny Wilkinson's last-minute drop goal to clinch the rugby World Cup 2003 for England kick-started a resurgence of national pride in sport. So it is no surprise that a government public opinion poll showed that 81 per cent were behind London's bid to host the 2012 Olympics.

According to the British Olympic Association, there are multiple benefits for the UK if London wins the bid. It claims that it will increase participation in sport and lead to a healthier society with less youth crime. The association also believes the games would be a "driving force" for social inclusion, breaking down divisions over age, gender, race or religion - this would be reinforced by the Paralympics. A successful bid would also regenerate east London, creating thousands of new jobs.

The bid itself is projected to cost £30m with a maximum public investment of £16m; the rest will come from private sponsorship. The winner will be announced in July 2005 and, if London wins, the government foresees that the national lottery will contribute up to £1.5bn towards the estimated £2.375bn cost of staging the games.

It is expected that some £750m of this will be raised through new Olympic lottery games. To this end, the government introduced the Horserace Betting and Olympic Lottery Bill in parliament last December. The bill establishes the principle of the new lottery games and provides powers to set up an Olympic lottery distribution fund.

But many in the voluntary and community sector are concerned about the ability of the new Olympic lottery games to raise this kind of money. Ticket sales on the national lottery itself have been down for some time. From every £1 lottery ticket, 28p goes to good causes with more than £15bn distributed to date. But the new games could well make a dent in the sale of current games - which in turn will reduce the money going to existing good causes.

And it seems these fears are not without foundation. The regulatory impact assessment for the Olympic Lottery Bill suggests that 59 per cent of the £750m over the seven-year lifespan (2005-12) might come from sales diversion from existing lottery games to the new games. Based on 2005-6 income forecasts, this represents an average annual reduction to good causes of £64m.

James Georgalakis, media and campaigns officer at the National Council for Voluntary Organisations, says: "We are quite sure that the pot of money from which charities and voluntary organisations apply for grants will shrink as a direct result of this approach to funding the Olympics."

Despite this, the bill went through the House of Commons unchallenged. However, when it appeared in the House of Lords at the beginning of this month it met with a frosty reaction. During the Lords debate, Lord Judd said: "It seems highly probable that such new [national lottery] games will eat into sales of other games, thereby reducing returns to the existing good causes."

Georgalakis adds: "The government will have to concede that it got this wrong and it needs to look at amending the bill. The Olympics is an emotive issue and has blinded MPs to what the impact might be. In everyone's enthusiasm for the Olympics, an inappropriate way of funding it, which could have serious implications for voluntary groups, could go through."

Concern over good causes funding and the lottery began last summer when the government published its national lottery funding white paper. It detailed the controversial decision to merge the lottery's Community Fund - which supports voluntary groups and less popular causes - with the New Opportunities Fund - which awards grants in line with government priorities. This led to fears that more money would end up going to the government's pet projects, such as the Olympic bid.

The bill has only fuelled the fears. The remaining £750m to come from the lottery will consist of £340m from the existing sports lottery budget and, if more money is needed, up to another £410m will be found from other sources after 2009, when the current lottery licence expires, says a spokesperson for the Department for Culture, Media and Sport (DCMS).

"This could be by changing the shares passing to existing good causes after 2009," he says. In effect, this means moving money from the national lottery distribution fund to the new Olympic lottery distribution fund and will be achieved through proposals in the bill which give the culture secretary powers to transfer funds from one to the other.


The NCVO wants the culture secretary to be given powers to transfer unclaimed national lottery money into the Olympic lottery fund instead. At the end of 2003, unclaimed prizes were worth more than £590m. But the DCMS spokesperson says there are no plans to change what happens to unclaimed money - which is distributed to existing good causes - arguing that the NCVO's proposal would take more money away from good causes.

Georgalakis disputes this: "Unclaimed money is additional to that already in the pot. It is a bonus because good causes haven't factored it into their budgets, so it's preferable that funding that was never a certainty goes to the Olympics. That's less damaging than the culture secretary being able to raid money from the national lottery distribution fund because of a shortfall in funding. It sets a worrying precedent."

Another suggestion to protect good causes' funding is to use the 12 per cent tax taken by the government from every lottery ticket - worth £549m a year. The NCVO wants this tax to be split equally between being put back into the lottery prize fund for mainstream games to encourage more participants with the promise of more or bigger prizes and the other half to go to existing good causes. This, it says, would go some way to protecting against the impact of the Olympic bid.

Perhaps we should not be alarmist for the time being. None of this will happen unless London wins the Olympic bid. Pat Samuel, team leader of the voluntary and community sector unit at the Treasury, says: "Although we certainly want to see the voluntary and community sector's share of the lottery safeguarded, this may not happen at all.

"Overall we have to bear in mind that something like the Olympics does provide quite a lot of volunteering opportunities for people, so there is a bit of good news."

But she admits that, if London does win the bid, the impact would be serious as it would only add to voluntary groups' insecure funding. "The best-case scenario would be for voluntary organisations not to be affected at all negatively. But we have to be realistic and there probably is going to be some effect. We hope it will be kept to a minimum."

And the DCMS spokesperson concedes that there will be an impact on good causes, but says "the boost that the Olympics will have on the rest of the lottery will hopefully compensate this".

He adds: "The games are going to have benefits far wider than just sport and not just in London."

But Georgalakis warns: "Almost every voluntary organisation that currently benefits from lottery funding should be concerned. If this happens it will be tougher for them to get the same funding levels."

Voluntary organisations face constant insecurity around funding. It is about time they were given a sporting chance.

- For more information see websites www.ncvo-vol.org.uk and www.olympics.org.uk 

When does it happen?

• May 2004 - IOC announces the cities to go through to the final vote.
• November 2004 - All cities submit their full bid with details on security, funding, facilities, infrastructure, transport and accommodation.
• July 2005 - Winner announced in Singapore.