Promotion of the arts in Scotland could be threatened by a decline in National Lottery funding.

The Department of Culture, Media and Sport (DCMS) has reported a fall in lottery sales from £5228m in 1997/98 to just £4966m in 2007/8, possibly as a result of people tightening their belts during these difficult economic times.

This has been compounded by £3m of lottery money being redirected each year to the 2012 Olympic Games.

A change in UK government laws has also put an end to arts organisations being able to stockpile lottery money earmarked for projects but not spent. In former times, this practice had allowed a reserve of capital to build up over a period of time to help fund future large arts projects.

According to The Herald, Scottish Screen's funding fell from £2.6m in 2004/5 to just more than £2m this year, while the Scottish Arts Council (SAC) has suffered from a reduction in capital from £19.2m to just over £12m. The Heritage Lottery Fund (HLF) in Scotland spent only £25m in 2007/8 compared with £62m in 2004/5.

Colin McLean, head of HLF in Scotland, told : "Now the competition for funds is much stronger and there is much higher demand for the money we do have. There will no longer be funds for giant projects.

"But then you look and wonder where are those giant projects going to be anyway? I do not think you can say that we are ever done with our work as far as those large projects are concerned, and who can say what will happen in the future."

Iain Munro, the SAC's head of lottery, added: "The reduction has definitely reduced what we want to do and what the sector wants to do. Although we have set aside money for the £3.1m Inspire projects, it is not something we will be able to do on a year on year basis. It is a question that has a major bearing in the transfer to Creative Scotland and will have a major bearing on what it does.

"The most important difference is that we cannot access large targeted grants as we have done before. These are just no longer possible."