The London Borough Grants Scheme supports charities that work across London boroughs.
But London Councils, an umbrella group for London’s 33 councils, has proposed closing the scheme and giving the money in the fund back to individual local authorities to spend as they choose, possibly as early as March next year. Consultation on the proposal ends on 10 November.
The payments by individual councils into the scheme, which supports 400 voluntary organisations in the capital each year, are topped up with a grant from the European Social Fund.
The letter, signed by Lasa chief executive Terry Stokes, has been sent to civil society minister Nick Hurd, Cabinet Office minister Francis Maude, communities secretary Eric Pickles and the mayor of London, Boris Johnson.
It urges them to "use your influence to ensure that London Councils preserves its funding for Lasa and other charities until 2012".
It adds: "If these cuts go ahead, many disadvantaged individuals could lose their homes, benefits and the support they rely on from local community groups, because they will not receive the advice that they need to avoid poverty.
"Ultimately, this will create huge costs to your department and its taxpayers."