Camelot, the national lottery operator, is trying to end a £2 million contribution that it makes to its charitable arm, whose programmes include supporting young people who deliberately harm themselves.

The move, which if implemented will lead to the almost immediate collapse of the Camelot Foundation, its charitable arm, comes as the organisation prepares to cut costs ahead of the third lottery licence, which takes effect in 2009. Camelot was awarded the ten-year year licence only last month.

The Camelot Foundation is separate from the good causes that receive 28 per cent of lottery income. It has received £24 million since its launch and was designed to boost the lottery operator’s image in the face of challenges to the licence from Sir Richard Branson’s not-for-profit People’s Lottery.

It is not clear why Camelot wants to stop paying the foundation the money, which last year amounted to 5.8 per cent of profits, although the company promised to boost returns to good causes when the new licence begins in February 2009.

Camelot insiders expect substantial job losses — rumours are circulating that 30 per cent of its 900 staff may be shed — but the company said last night that no decisions had been taken. “This is a much more long-term discussion,” a spokesman said.

The foundation was due to be wound down in 2009, when the third lottery term begins, but £2 million was still required to keep the charity going next year. It is understood that the foundation trustees were told on Wednesday that Camelot was unlikely to pay the money — although the trustees are understood to have asked for Camelot to reconsider. Camelot’s board met on the same day and is likely to have discussed the issue.

A final decision is due imminently. The foundation needs £1 million immediately to continue operating and funding its work. However, the expectation is that Camelot will simply confirm its decision to cease funding. A spokesman for Camelot said: “The financial detail of the foundation has not been decided yet.”

The Camelot Foundation runs a programme dedicated to tackling the issue of young people who self-harm. It also backs Transforming Lives, an organisation that gives grants to bodies working with marginalised young people in Cornwall, Wales, Northern Ireland and the Highlands and Islands.

Camelot is owned by five companies: Cadbury Schweppes, the confectionery group; De La Rue, the security printer; Fujitsu, the IT services arm of the Japanese electronics group; Thales, the French military and communications group; and Royal Mail.

Camelot this year beat Sugal & Damani, its Indian rival, to win a third consecutive licence, which will last ten years. Details as to how Camelot will run the new licence have not been revealed, but the operator hopes to boost sales through a series of new games, including a global lottery.

Camelot takes 4.8p in every £1 spent in running costs, with 0.5p of that sum retained as profit for the shareholders. Half of the £4.9 billion raised in the year to March 31 was handed back as prize money and £1.24 billion was paid to good causes.

Last year board members earned £2.8 million, including pension payments, with Dianne Thompson taking home £947,000. This year’s figures are due to be published in the annual report due next month, although it is thought that Ms Thompson’s total pay will still be less than £1 million.

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