The NCVO has written to the Treasury warning it not to raid the Big Lottery Fund again to find the extra £250m needed to pay the VAT on the construction costs of the London 2012 Olympics.
Stuart Etherington, chief executive of the NCVO, has written to Dawn Primarolo, the Treasury minister responsible for the voluntary sector, saying charities are already losing out as a result of the £1.5bn of lottery funding that has been diverted to the Olympics. Any more could destabilise the sector, he said.
The NCVO and its sister organisations in Wales, Scotland and Northern Ireland are suggesting the Treasury should instead scrap the 12 per cent tax on lottery tickets.
"We believe the case for revisiting the full 12 per cent tax, worth £571m per year, is now overwhelming," Etherington writes in the letter.
He said that, if the tax were to be scrapped between 1 April 2006 and 31 March 2013, £1bn would be freed for use on the games.
The umbrella bodies have also written to Ed Vaizey, shadow arts minister.
The Wellcome Trust has questioned why the Government is considering applying VAT refund schemes to the Olympics building project when it will not grant relief to charities that run public services. "The Olympics shows that where there's a will, there's a way," said finance director David Phillipps.