Sport England, which is set to be merged with UK Sport in a bid to reduce costs, was one of the biggest casualties as the settlement represents a 33 per cent reduction in its grant in aid revenue funding by 2014/15.

Sport England chief executive Jennie Price responded to the 41 per cent reduction in costs by saying: "Today's announcement is tough for grassroots sport, and in particular the coaches, volunteers and clubs in communities across the country.

"We recognise, however, that these are challenging times for everyone.

"In our discussions with DCMS, we underlined the importance of protecting our core investment in 46 sports and I am pleased that this is reflected in our settlement."

Like every other organisation, Sport England is optimstic that a change in how National Lottery money is distributed will help soften the impact of today's announcement.

Price said: "We also welcome the Government's Lottery reforms, which will bring considerable additional funding into grassroots sport.

"Sport England's priority is a simple one, ensuring as many people as possible play sport.

"With less grant aid funding available it is more important than ever that each pound reaches right down to the grassroots."

The reduction in the DCMS's administration costs - including the abolition or substantial reform of 19 quangos – will result in a 15 per cent cut to frontline funding for the sport and arts over the next four years as the DCMS proved one of the biggest losers of the day.

Some good news came as Osborne said the London 2012 budget of £9.3 billion ($14.7 billion) will be left untouched but is unlikely to offer much compensation to the areas where the axe has fallen the hardest.

UK Sport, the nation's high-performance sports agency, will see its exchequer funding reduced by 28 per cent over four years but claimed that, despite the apparent blow, its settlement represents "a positive outcome in difficult times" as elite athletes will not be stripped of their funding.

UK Sport chief executive Liz Nicholl said: "This settlement represents a positive outcome in difficult times.

"While tough, it recognises that the funding and support we give to Olympic and Paralympic sport is a crucial element of the nation's London 2012 ambition.

"Ministers have been clear throughout the process that they see the continued support of sports and athletes through to London 2012 as a priority, and this reduction will not have any significant impact on our goals.

"The settlement means that, combined with the proposed changes in National Lottery distribution and the future income projected as a result, we believe we have the resources we need to fund athletes and support services through to 2012, should sports continue to justify that funding on performance grounds."

But Nicholl warned that athletes faced a cut in their funding for the Rio 2016 Olympics and Paralympics.

She said: "For the following Rio [2016] cycle, we will see further reductions but have committed to ensuring that over the period of the spending review we do not reduce our investment in the Summer Olympic and Paralympic sports programme by more than 15 per cent.

"Again we should see an increase in National Lottery funding help us to manage this.

"No decision the Government has had to make today will have been easy, but this outcome is an acknowledgement of the success of the high performance system we are collectively developing in this country, and of the vital nature of especially the National Lottery, but also private sector income such as that provided by Team 2012 to complement exchequer funds."

British Olympic Association (BOA) chairman Colin Moynihan (pictured) added: "In this difficult economic climate we welcome the Government's continued support for the key elements of the London 2012 Olympic Games programme.

"In particular, we strongly support the safeguarding of funding to the National Governing Bodies of Olympic sports and elite athletes through a combination of Exchequer and lottery funding.

"This funding is critical to the success of Team GB at London 2012.

"It will ensure athletes from across the UK are able to perform to the best of their ability and, in doing so, inspire future generations of sport participants and act as a catalyst for national pride and unity.

"The BOA recognises that it is important now more than ever, for all stakeholders in sport to utilise resources in the most cost-effective way and we will continue to work with partners to deliver services to sports and athletes as efficiently as possible."

Various Olympic and Paralympic sports across Britain admitted they were pleased to see they will be fully funded through to 2012 although uncertain times lie waiting for them following the conclusion of the Olympic and the Paralympics.

Zara Hyde Peters, chief executive of British Triathlon, said: "As an Olympic sport, we really value the opportunity we now have to complete the job we have set out to do in London in under two years' time.

"What it will also do is ensure that events in 2012 leave behind a solid legacy for the future of triathlon in the UK."

David Faulkner, Performance Director of Great Britain Hockey, said: "We are delighted the momentum we have created over the last 18 months can be sustained and we will now have the support to see this particular journey through to completion in London 2012."

David Sparkes, chief executive of British Swimming, said: "While we recognise that these are difficult times, we welcome the proposed increased investment from the Lottery into elite sport which will enable us to continue our planned preparations for the Olympic Games in London.

"Our goal there is to improve on our performance from Beijing which in itself was our best for 100 years.

"We will work closely with UK Sport and the DCMS to sure that every penny of the investment goes towards preparing our athletes for the Games and to get value for money in everything we do.

"Our continued improvements have been demonstrated in Delhi, where we achieved great success with our best ever Commonwealth Games in difficult circumstances and at the European Championships in Budapest earlier in the year."

John Derbyshire, British Sailing's Olympic Performance Director , said: "The Minister for Sport had told us that he would do his best to protect athlete funding in the lead-up to the incredible opportunity we have in just under two years' time.

"Today's announcement has done just that and means we can continue with our plans for 2012, while building a solid platform for future success in 2016 and beyond.

"We aim to repay this investment by winning medals for Team GB plc at the London 2012 Games."

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