Culture Secretary Tessa Jowell today described a White Paper on reform of the National Lottery as the "biggest upheaval since its inception".
Ms Jowell outlined plans to break up the Lottery by offering different licences for the various games, greater public involvement in decision making on Lottery grants, and "micro grants" of less than £500 to help local communities.
She told delegates from the voluntary sector at the annual conference of Lottery Monitor magazine: "I do not expect everyone to like everything about the review but I passionately believe that permanent revolution is essential for the Lottery's survival."
Ms Jowell claimed the decision to effectively end Camelot's monopoly control of the lottery was not an indication that the Government was unhappy about how the company had run the game since it launched in 1994.
She said: "None of the proposals are a reflection on anybody's performance – not Camelot's, Michael Grade (Camelot chairman) or the Lottery Commission.
"The Lottery needs to change with the times and we should always encourage innovation."
She said the Lottery Commission, as regulator of the game, would have the power to award licences over differing time periods.
Throughout her speech, Ms Jowell emphasised the need to "give the Lottery back to the people" and to make it easier for organisations to apply for funding.
The merger of the Community Fund and the new Opportunities Fund, confirmed in the White Paper, will create a body responsible for allocating around half of all grants to "good causes".
Ms Jowell said the new body would act as a gateway for anyone looking for help and advice on applying.
It will also oversee the new £200 million Young People's Fund, to be established within a year, for projects promoting facilities after school and in holiday periods.
Ms Jowell also confirmed plans for a National Lottery Day starting next year to coincide with the 10th anniversary game.
"Lottery–funded projects throughout the country, wherever possible, will fling open their doors for that day for free," she told the conference.
"We hope those who have benefited from the Lottery, such as athletes and artists, will offer their time to inspire the bright young people who may become their successors."
Also in the White Paper are plans to have plaques carrying the National Lottery crossed–fingers logo on projects across the country which have received funding.
Mr Grade pledged earlier that Camelot would fund 10,000 of the proposed plaques.
Sir Richard Branson, whose People's Lottery consortium was beaten by Camelot in the last round of bidding to run the National Lottery, called on the Government to stick to its election pledge and set up a "National Lottery for the people, with all profits going to good causes".
Speaking about Ms Jowell's announcement, he said: "Breaking up the National Lottery because one commercial operator has failed is certainly not the answer.
"What's been suggested won't be as cost–effective as keeping the Lottery together and will therefore cost good causes even more money.
"One single operator running the Lottery, with all the money going to good causes, has been proved worldwide to be the best and most efficient way for a Lottery to be run."
He added: "However, if the Government wants real competition, it would be better to introduce two competing National Lotteries without fragmenting them.
"If they used the White Paper for this purpose, the People's Lottery could be up and running and competing with Camelot within 12 months.
"The people could then decide which they wanted to play."
Tony Burton, director of policy and campaigns at the National Trust, said "Lottery funding from the Heritage Lottery Fund and other distributors has been hugely important in restoring and enhancing historic places and the natural environment.
"We welcome the Government's commitment to funding the arts, heritage and sport to existing levels but this work has only just begun and any future arrangements must build on the expertise developed to date and recognise the importance and long term nature of heritage projects."
Shadow culture secretary John Whittingdale said: "In the last few years, the Government has been using the National Lottery to fund its own spending priorities and this, combined with a few controversial grants, has destroyed public confidence that Lottery money will help genuinely good causes.
"The merger of the Community Fund and the New Opportunities Fund does raise concerns that the Government will take control of an even greater share of Lottery money and we will want cast–iron guarantees in legislation that the money going to the voluntary sector is protected and completely independent of Government interference.
"We also think that the Government should have gone further to give people a real say over which individual charitable causes in their own local communities benefit from their Lottery ticket purchases."