It all began with a routine Daily Mail horror story on lottery funding about a group supporting asylum seekers. By Saturday evening it had become one of the most blatant attempts by the Government to compromise the independence of the lottery boards.
Alerted by Sunday Times' journalists, Home Secretary David Blunkett prepared a "scathing
attack on the Community Fund for a £340,000 grant to the National Coalition of Anti-Deportation Campaigns, which provides help and advice to asylum seekers facing deportation.
Blunkett calmed down sufficiently to agree to a joint statement with Culture Secretary Tessa Jowell which merely questioned whether the coalition had always operated within the law and whether its activities were overtly "political".
The Community Fund agreed to carry out additional checks on the organisation but remains convinced, until persuaded otherwise, that it has no reason to rescind the grant. It is also somewhat taken aback by the "highly unusual
step of a senior government minister publicly calling into question its grant-making decisions.
Boni Sones, the Community Fund's head of public affairs, concedes that the definition of "political
is a "grey area". The fund follows Charity Commission rules on the subject despite the fact that many of its grant recipients are not registered charities. This guidance states that charities "may engage in activities which are directed at securing, or opposing, changes in the law or government policy or decisions, whether in this country or abroad,
although they may not support political parties and their entire purpose cannot be political.
"We also fund ChildLine, Oxfam and the UK Coalition Against Poverty, which all campaign for changes in the law,
says Sones. "We actually funded the UK Coalition Against Poverty to set up a secretariat for the All-Party Parliamentary Group on poverty."
Ironically, funding groups that support asylum seekers is one of the Community Fund's six priority areas outlined in this year's Strategic Plan. The plan was sent to every MP including Blunkett without provoking outrage.
NCVO, not noted for intemperate outbursts against government policy, was strident in its response to Blunkett's intervention, accusing him of breaking the terms of the Compact, which sets out the rules of engagement between the public and voluntary sectors. "It sets a worrying precedent,
says director of public policy Campbell Robb. "The main worry is the Compact which states that charities can criticise the Government whatever the funding relationship. We believe there should not be political interference in grant-giving. We will be watching to see that it doesn't happen again."
Simon Hebditch, director of policy at the Charities Aid Foundation, described Blunkett's public statement as "an appalling example of potential government interference in the decisions of what should be an independent agency. Distributors should have robust systems of checking grant applicants. If the Government is happy that they do, it should live with their decisions".
Hebditch questioned whether the motivation behind the intervention might be to ensure that, in future, the fund confines its grant-making to groups that are "acceptable to government".
The case is perhaps most unnerving for the voluntary sector because of who lies at its centre. Blunkett may have a reputation to uphold as the "hard man
of the Cabinet but he can hardly plead innocence on the nuances of the Government-voluntary sector relationship. As Home Secretary and Lord Filkin's boss, Blunkett is the minister ultimately responsible for voluntary-sector issues and also for the Active Community Unit, which is attempting to "breathe new life
into the Compact and encourage its adherence across the Government.
In addition, Blunkett is sponsor minister for the Performance and Innovation Unit's review of charity law and status which is widely expected to broaden the legislation to allow organisations such as Amnesty to register as charities without fear of falling foul of the rules on political campaigning.
Perhaps not, if this episode provides any insight into his thinking.
Blunkett's intervention is also the latest in a series of incremental encroachments on the independence of the lottery since Labour came to power. In 1997, the New Opportunities Fund was set up. With its funding parameters set by ministers, it has been widely seen as a means for Labour to supplement its public spending priorities through lottery ticket sales.
After the winding up of the Millennium Commission in 2001, the New Opportunities Fund now gets around a third of all lottery cash.
The Fair Share initiative, an attempt to remedy perceived inequalities in the distribution of lottery grants after the 2001 election, was foisted on the Community Fund without consultation.
There are also more serious threats looming. The Government's new White Paper on regional government, a product of John Prescott's Office of the Deputy Prime Minister, has proposed appointing local councillors to regional lottery awards committees. The Community Fund fears it could become yet another branch of local government.
The Green Paper on the future of the lottery, from the Department for Culture, Media and Sport, has floated the idea of a single lottery distribution board. With the Community Fund clearly the most independent of the five lottery boards, merger could reduce it to the semi-statutory status of the New Opportunities Fund.