The lottery was launched in 1994

Culture Secretary Tessa Jowell wants to reduce the �3.1 billion currently allocated for charities and projects which has not yet been given out.

She had asked the distributing boards to reduce the fund to �1.8bn by April 2004, but so far the figure has only come down by �500 million.

Organisations which fail to meet the target could lose some of the interest earned on the cash, with the money diverted to those which have done better.

"It is obvious that the cash mountain needs to come down and if the bodies are not going to do it themselves, then other measures may need to be taken," said a Culture Department spokesman.

Distributors of good causes cash Four national Arts Councils Four national Sports Councils UK Sport the Heritage Lottery Fund the Community Fund the Millennium Commission the New Opportunities Fund Film Council Scottish Screen

The bodies responsible for distributing Lotto money make their own funding decisions independently of the government, but within a framework of government policy.

This says there should be a fair geographical spread of awards, with each distributor giving funds to areas of the country which have not previously benefited from lottery money.

In the past grants have been awarded to several large prestigious projects, but recently the number of awards going to small projects has trebled.

Licensing changes

Other changes to the way the money is allocated and distributed are due to be announced by Ms Jowell in a White Paper on Thursday.

She is expected to outline plans for more grass roots decision-making and for the application process to be made more simple.

Proposals for bringing together all the distributing bodies into one umbrella organisation have been scrapped, although the merger of the Community Fund and the New Opportunities Fund will go ahead.

Together, these two bodies account for about 50% of money handed out.

Ms Jowell will also announce changes to how the Lottery is licensed.

These are expected to include allowing different companies to bid to run the games and to operate the infrastructure, including in-store terminals.

The changes will mean Camelot losing its monopoly.

Prize money

The shake-up was partly prompted by falling sales which the company has failed to reverse despite a multi-million pound relaunch of the game.

Currently 28 pence in every pound spent on a Lotto ticket goes to good causes in the UK.

In the past financial year, Camelot, which runs the lottery, raised �1,376.5m for good causes bringing the total amount raised to �12.7bn since its launch in 1994.

Interest earned on the National Lottery Distribution Fund balance is also added to the amount available for good causes.

This is shared between the distributing bodies in proportion to their share of the fund.

Unclaimed prize money and interest earned on it, is also added to the pot.