Currently 12.5% is taken by the government in lottery tax, a figure that is worth £571m per year. In addition around £1.5 billion is expected to be diverted from good causes to support the 2012 Olympics and representatives from the sector claim that this is having an unfair impact on the sector.

There has been no formal review of the 12% rate in eleven years of the lottery. The National Council for Voluntary Organisations (NCVO), the Scottish Council for voluntary organisations (SCVO), Wales Council for Voluntary Action (WCVA) and the Northern Ireland Council for Voluntary Action (NICVA) have called for reform in a letter to the Treasury minister Ivan Lewis.

They are asking for an interim measure within which the government reduces the tax rate to 9% and uses the 3% for good causes over the Olympic period with a review at the end. If implemented between 1 April 2006 and 31 March 2013 around £140.3 million will be available for good causes per annum; totalling around £1 billion over the three year period. Although this will be less than the proposed £1.5 billion which is to be allocated to the Olympics, the umbrella groups feel this is a more proportionate way for the sector to contribute to the Games, without penalising good causes.

Campbell Robb, NCVO’s director of public policy, said: “We believe it is vital that there is reform to the tax to compensate for the large amounts of money being redirected from good causes to the Olympics so that the vital work being carried out by the sector is not damaged by the Olympics - an event which should unite us.”