How the 2012 Olympics continue to eat into the sector's lottery funding

Charities and voluntary groups across England are likely to lose as much as £200m in grants from the Big Lottery Fund as a result of players switching from mainstream lottery games to special Olympics games designed to fund London 2012.

Third Sector has established the full cost to charities for the first time by using information supplied by the Liberal Democrats, which isolates the effect of game-switching for each lottery distributor.

The effect of this switching, or 'cannibalisation', is calculated as a percentage of the £750m of Olympics funding that lottery operator Camelot is required to raise through the special games.

Camelot originally assumed that 59 per cent of this revenue would come from players switching from mainstream games, but it has now raised that estimate to 77 per cent.

Cannibalisation at this level will cost the Big Lottery Fund £287.5m. It has pledged to reserve 60 to 70 per cent of its funding for the voluntary sector, which will therefore miss out on between £172.5m and £201.3m - roughly twice the amount allocated to the BLF's popular Reaching Communities programme this year.

This extra loss comes on top of two Olympics raids on the lottery. The BLF was told in 2003 to contribute £213.1m, and in March this year was required to give an additional £425m. Including cannibalisation, the sector will have lost between £555.4m and £647.9m.

Don Foster, Liberal Democrat culture spokesman, said the research by his office demonstrated that ministers' calculations were widely wrong. "As a result, the lasting legacy - one of the main reasons we won the right to host the 2012 Olympics - has been seriously jeopardised," he said. "The Government must now be honest about the real impact these funding cuts will have on the voluntary sector."

A spokesman for the Department for Culture, Media and Sport said there was no way of knowing an exact diversion rate, and the way to counteract diversion was to increase overall sales.

"Under arrangements to recoup lottery money from land sales proceeds after 2012, the BLF has a good chance of getting a good percentage of its £638m contribution back - so it is not 'lost'."

Olympic records

How the cost of the games has continued to rise

£2.4bn: The amount the Government originally said the Olympic Games would cost, with £750m (31%) coming from National Lottery good causes money

£750m: The amount to be raised from special Olympics lottery games, launched in 2005

59%: Camelot's earlier assumption of the proportion of Olympics lottery games income that would come at the expense of other games. This 'cannibalisation' would amount to £442.5m

£9.3bn: The Government's revised estimate of the cost of the Olympics. A second raid on the lottery raised the contribution from good causes money to £1.4bn

77%: Camelot's latest estimate of cannibalisation, raising it to £575m out of the £750m

£555 TO £648m: The amount the sector will lose in grants from the Big Lottery Fund by 2012. Sector beneficiaries of the Heritage Lottery Fund, Arts Council England and Sport England will lose £333m.

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