It had been planned that a new body would be set up to hand out the money, estimated to amount to pounds 285m a year each for the arts, heritage and sport and pounds 195m for charities, after prizes and administration costs.
But Mr Mellor is understood to have turned against creating a new bureaucracy and will be content to allow existing grant bodies to decide where to hand out the cash. In the case of the performing arts this would be the Arts Council, which might alarm a number of institutions who have had poor relations with the funding bodies in the past.
Another key change to the original lottery ideas being considered by the Secretary of State is that lottery money could go to revenue as well as capital projects. In other words it would not have to be used, for example, to replace a roof on a museum or build a new stand in a sports ground; it could contribute to the annual running costs of an arts company or sports organisation.
Simon Mundy, director of the National Campaign for the Arts, said: 'This would be very dangerous. The money would just be seen as part of these companies' budgets; but it would be a very unsafe and unpredictable part. Who knows what will happen in future years with the lottery?' He added that if existing bodies distributed lottery cash and the money was not ring-fenced, there was a danger that it would be seen by the Treasury as part of the annual budgets of those bodies.
Mr Mellor has also decided to make the national lottery unique among lotteries in Europe by insisting that much of the money is given out on a 'challenge funding' principle.
This means institutions that receive a sum of money from the lottery will have to raise a matching sum through their own efforts. This will be applied to most, but not all, recipients.
The lottery was in the Conservatives' election manifesto, and a Bill will be introduced to Parliament before Christmas so that the lottery will be on stream by 1994. However, ministry sources are stressing that they foresee a tough passage through Parliament with opposition coming from wings of both main parties, some fearing the gambling aspect, others the possibility of state funding being reduced to lottery beneficiaries.
Indeed at this week's Independent/Traverse Theatre conference in Edinburgh, Mr Mellor publicly urged those who believed in a lottery to go out and argue for it, a seemingly strange move for something already in the Government's manifesto.
Ministers are also worried that the pounds 1bn estimate of money likely to be raised from a lottery could be wildly wrong.
'We have no experience of how British people will react to it,' one said. 'They might buy tickets, they might not. Where are these figures coming from?'Reuse content