Speaking at the Westminster launch alongside the fund's chief executive Richard Gutch, Blunkett told about 1,000 voluntary and public service sector delegates: "Providing appropriate public services to those who need them is vital to building strong, active communities. By providing capital investment and development funding, Futurebuilders will enable the voluntary and community sector to play its role.

"Futurebuilders is an exciting partnership that will bring about a real change in the way we deliver public services."

The £125 million "capital investment" fund will support about 250 groups over the next three years with grants from £10,000 to several million to help build their capacity to provide public services in five areas of activity: community cohesion, crime, education and learning, health and social care, and support for children and young people. The majority of organisations supported are expected to be local or regional groups.

The fund will aim to champion an "engaged approach" to funding by investing in capacity building such as support, training and advice, and ensuring that the fund helps applicants to diversify and strengthen their funding base, as well as experimenting with new ways of providing finance.

"We hope to learn lessons from the investments we make so that we can demonstrate how we can all work to improve public service delivery in the future," said Gutch today.

The first applicants are expected to receive funding this summer, and the website for the scheme at www.futurebuilders-england.org.uk goes live today.