Scottish charities are bracing themselves for potentially devastating cuts to the budget of the Big Lottery Fund, which could mean £30m is taken from the sector in Scotland to help mitigate cuts to arts and sport.

The UK Government is understood to be considering cutting 40 per cent or more from the amount of lottery money which is distributed to charities via BLF and using it instead to effectively compensate arts and sports bodies for planned cuts to the budget of the Department for Culture, Media and Sport.

In an echo of the controversial 'borrowing' of £638m from lottery cash for charities to help fund the London Olympics - still not fully repaid - sources claimed last night to have been told the Government wanted to remove £320m a year from the Big Lottery Fund in the current comprehensive spending review. It currently receives £670m annually to help fund charities, and community organisations and projects.

In Scotland such a cut would mean funding available for charities to apply for will be cut from £70m a year to around £40m. Effectively, such a cut would leave the Big Lottery Fund in Scotland unable to fund anything beyond its existing commitments for the forseeable future.

BLF funds thousands and thousands of voluntary sector organisations across the country, from pensioner clubs to girl guides and from tiny community groups to big national charities.

Sources in the charity sector say that if the speculation is true it will be absolutely devastating for a sector already struggling with rising need and falling income due to austerity policies.

Charities north of the border have no confirmation of the planned cut, but insiders say the proposals appear to be serious with huge implications for the voluntary sector.

John Downie, policy officer for the Scottish Council for Voluntary Organisations, said the amount of money potentially being transferred out of the sector was huge and if the plans were confirmed the consequences would be significant.

A blog post by an unidentified group called Save Big Lottery attributed the £320m figure to 'reliable sources' and said the change would "devastate charities, community groups and voluntary organisations across the UK".

The group said: "We are apolitical, independent and care only for the people and communities most in need."

The authors also said using the money to 'save face' over arts and sports cuts was a breach of the additionality principle - which states that the Lottery should supplement not replace government funding.

"The Government plans to save face by cutting the share of "good causes" money from the National Lottery going to the Big Lottery Fund and transferring it to arts, sport and heritage," its statement says. "These causes have celebrity backers and influence in high places that the people and communities most in need do not. Spending more Lottery funds on arts, sport and heritage at a time when Government expenditure on arts, sport and heritage is being cut demands independent scrutiny to ensure the additionality principle is not breached."

Ciaran Price, policy officer at the training and publishing charity the Directory of Social Change, said: "If this is true, it is outrageous. Lottery money is not there make up for budget cuts, it’s there to support communities and is a vital life-line for our beneficiaries. Charities are already struggling to meet increasing demands on their services and face huge financial uncertainty for the future."

A spokeswoman for the Big Lottery Fund in Scotland said; "We have been alerted to the campaign on social media. We have no further information on this. This is a matter for the Department for Culture Media and Sport."

However a spokeswoman for DCMS said: "We will not comment on speculation ahead of the comprehensive spending review which will be published on November 25th."