Culture Secretary Tessa Jowell has given a "1,000 per cent assurance" that there will be no decrease in lottery funding to the sector when the Community Fund and New Opportunities Fund merge.
In a meeting with sector representatives last week, Jowell promised that the current shares of good cause money that go to the two funds would be maintained at least until 2009, when Camelot's licence to run the lottery expires.
The New Opportunities Fund currently receives 33 per cent and the Community Fund 17 per cent of the money from the National Lottery Distribution Fund.
Jowell also guaranteed that the grants from the new merged lottery distributor would be in addition to government spending. But she said that all other issues regarding the nature of the new distributor would be up for discussion when the three-month consultation with the sector begins following the publication of a White Paper in July.
She said the Government wanted to make the new fund more proactive and accessible to small voluntary groups that don't have the capacity to apply successfully for grants. She also challenged sector umbrella bodies to come up with specific models for the way it would work.
Kevin Curley, chief executive of the National Association of Councils for Voluntary Service, who attended the meeting, said that Jowell had gone some way to assuaging concerns among the sector at the prospect of merger.
"The minister was very receptive to the ideas that were put forward during the meeting," he said.
"At the moment, the local voluntary and community sector feels that what is being proposed is a great loss to the sector. We want to work with the Government to ensure that whatever comes out of the process is a step forward."
But Stephen Burkeman, vice-chairman of the Community Fund's England Committee, said the Government still had to answer a number of questions raised by the merger.
"I'm glad to hear reassuring noises from the Secretary of State, but there are still major issues to be resolved and lots of discussions to be had," he said.
Burkeman said that the definition of additionality to government spending was contentious.
"There are two different approaches. There is the New Opportunities Fund's approach which says that something is additional if the Government isn't doing it, and there is a second approach which says that something is additional if the Government isn't responsible for it. We still have to clarify which definition will prevail," he said.
Maurice Wren, co-ordinator of Asylum Aid, which receives a Community Fund grant, said it was important that the Community Fund's designation of refugees and asylum seekers as a funding priority was maintained.
"To have a major funder prioritise asylum seekers is a very positive thing, not only in itself,but also in the message to other funders," he said. "It is essential that any new body has a commitment to funding unpopular causes."