The writer and broadcaster said the money should be put into one or two of the newly available television channels, or threaded through the sector, to give people under 35 the chance to make programmes.
"We are rich in the amount of talent coming through the broadcasting industry. We are increasingly poor at training that talent. We are even poorer at finding places for that talent to grow," Mr Bragg said.
"The worst part of my job is turning down ideas by good people. I am sure this happens to editors and commissioning editors all over the system. But the number of young people now coming on line need a budget and they need somewhere to show their wares."
His comments, made at the launch of the 20th season of The South Bank Show, may indicate the start of a fight by ITV to keep all its advertising and sponsorship revenues, instead of being forced to pay (in the case of the larger companies) a levy of up to 11 per cent to the Government.
Such revenue could become crucial as competition in the commercial sector intensifies with the launch of Channel 5 in January and the rapid growth of the satellite and cable companies. ITV will also see a substantial drop in its income following Channel 4's success in throwing off its requirement to pay a proportion of its profit to the ITV companies under the notorious "funding formula".
Mr Bragg said he had first mentioned the idea to Mrs Bottomley at a breakfast at the Ritz about a year ago. Nothing had been done, so now he was saying it publicly.
"Surely one government or another in the next 12 months can devote this substantial amount of money - half the tax on a non-existent [advertising] monopoly - to channels which would invest in this talent?
"And with lottery money and good management we might at last begin to punch our full weight in the world of television and films."
Young, talented programme- and film-makers needed "decent" outlets and while they have been until now supplied by the BBC and Channel 4, they were in danger of breaking down. "With the end of long-term contracts, with the breaking-up of creative clusters which gave us so many of our best programmes, with the setting aside of training programmes ... we are threatening to destroy a fine and profitable tradition," Mr Bragg said.
He had started his career as a BBC trainee in 1961. While it was as difficult to break into television in those days, it had become far harder to get the chance to make and show high-quality work.
If Mrs Bottomley did not take heed, Britain "will wither into world-wide wannabees, left at the post", Mr Bragg concluded.
His speech echoes a similar lament last year by Andy Allen, now director of programmes at Carlton, who warned that television was failing to invest in its future and no longer giving senior jobs to young talent.