LONDON, Feb 25 - London's good causes will lose nearly half a billion pounds in lottery money as a result of funds being diverted to help pay for the 2012 Olympics, according to a report.

More than 2.2 billion pounds of National Lottery funds will go towards the 9.3 billion pounds cost of the Games.

London will lose 440 million pounds of that lottery money, with voluntary and local community organisations suffering the most, says a report by the London Assembly's economic development, culture, sport and tourism committee.

The most likely groups to suffer are the ones expected to help the government reach its target on sports participation, the report said.

The government wants to increase the number of physically active people by two million by 2012.

It also wants to increase participation in cultural activities as part of its four-year Cultural Olympiad programme.

"The priorities that underpin the decision to use Lottery money to pay for the 2012 Games are not merely questionable but self-contradictory," the report said.

"The concern here is that by taking money away from the arts, heritage and grass-roots sports sectors, the diversion of Lottery money will make it harder for some of the goals associated with the London Games to be realised."

The committee recognised the opportunities the 2012 Games would bring London, but raised major concerns at the government's "overly optimistic" plans to use the sale of Olympic land to partially reimburse the Lottery.

The government, in a Memorandum of Understanding in 2007, said it expected the land to fetch 1.8 billion pounds, but the London Development Agency has since revealed that it is working on the basis of a more conservative estimate of 838 million pounds.

That would result in the Lottery being repaid just 136 million pounds instead of the planned 675 million pounds.

The Lottery would also not receive any repayment until 2021/22.

"There is a serious risk that some projects and organisations will disappear in the interim," the report added.

"The delay strengthens the committee's concern that by depriving broader arts, heritage and cultural activities of funding over the period building up to the Games, the diversion will leave them in a shrunken and de-motivated state after the event and do long-term damage to London's cultural scene."