Adlington benefited from UK Sport funding in the build up to the Olympics

The Government is to merge UK Sport and Sport England - the two bodies who distribute National Lottery funding.

UK Sport funds Olympic athletes and aims to develop promising talent while Sport England funds grassroots sports in terms of facilities and coaching.

Culture secretary Jeremy Hunt said the merger would "create a more effective structure to deliver sport success and a wider legacy from the 2012 Games".

The merger is unlikely to take place before the London 2012 Olympics.

The biggest issue remains how to combine a body that affects the whole of the UK with one which only covers England - Scotland, Wales and Northern Ireland have similar funding bodies to Sport England and these would almost certainly be retained as individual organisations.

"Where proposed changes have implications for the devolved administrations in Scotland, Wales and Northern Ireland we will work closely with them to finalise proposals," said a spokesman for the Department for Culture, Media and Sport.

The main savings could come from the new organisation sharing offices and resources to cut costs and bureaucracy.

Currently, they both lease expensive central London offices and many administration costs are duplicated. It is unlikely any merger will take place until at least one of the leases expires.

While it is too early to say what the further changes will mean, we are clear that any solution must be one which benefits sport as a whole Richard Lewis - Sport England chair

"Today's statement builds upon the Minister's previous announcement of the location of UK Sport and Sport England under a single roof," said Sport England's chairman Richard Lewis.

"While it is too early to say what the further changes will mean, we are clear that any solution must be one which benefits sport as a whole, particularly as we approach the milestone of two years to go until the London Olympic and Paralympic Games."

The merger has been on the cards since the election of the coalition Government. The Conservatives' pre-election policy document promised to bring Sport England, UK Sport and the Youth Sports Trust under a single roof but to retain their separate identities.

The issue with the Youth Sport Trust remains more complicated - although it receives much public money it is a charity and therefore it would be much more difficult to merge it with the two public bodies.

The two bodies have been given almost £800m in the run-up to the Games and are not the only two organisations to be "merged, abolished or streamlined as part of the Government's drive to cut costs and increase transparency, accountability and efficiency".

"The news that the Department is planning to merge UK Sport with Sport England goes further than we had previously expected," said UK Sport Chair, Baroness Sue Campbell.

"What is crucial now is that all sides engaged in this decision understand not only the issues but also the risks involved in such a move. We will as always play our part in seeking the best solution for sport and seeking to make the delivery system as efficient as possible."

Other proposals include abolishing the UK Film Council and establishing a direct and less bureaucratic relationship with the British Film Institute.

The government also plans to abolish the Museums, Libraries and Archives Council to focus efforts on front-line, essential services and ensure greater value for money.

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