The National Lottery plants its golden footprints up and down the land. And 12bn of good has been done so far: the Angel of the North spreads its iron wings, athletes hold gold medals aloft hailing the lottery that made them possible, the Eden project gleams within its glass domes, while hundreds of new community centres start thriving local activities. Decayed parks in towns everywhere are restored to Victorian municipal glory. A playgroup arises in an area with none. And, yes, asylum seekers get a little too.  But the lottery always had enemies. On the left puritans complain it is a regressive tax on the poor (though they don't propose banning Ladrokes). The moral right are uneasy at state-sponsored sin, but mainly loathe do-gooders. The result is sour sniping at everything the lottery does, emphasising the errors - the dome and the Churchill papers. But the latest war over grants to asylum seekers is doing real damage, destroying pride in its great benefits.   This is a story of folly and also of wickedness. Start with the folly: the Community Fund, one of the six boards distributing lottery largesse, gave money to the National Coalition of Anti-Deportation Campaigns (NCACD), a Birmingham group counselling asylum seekers on their rights, fighting deportations and getting many decisions successfully reversed. This is unpopular but necessary work: people should be helped to use what rights they have. They also campaign against the asylum laws, but that is not against charity law. All well and good. However, had the Community Fund glanced at the group's website, they would have found some wild, abusive stuff unbefitting lottery recipients. One group compared Bush to Hitler. The NCACD accused Blunkett of "colluding with fascism". Unwise.   When Blunkett learned of a relatively small story on page 5 in the Mail about this grant, he went nuclear. He could have picked up the telephone for a private word with Tessa Jowell, the culture secretary who oversees the lottery. Together they could have limited the damage quietly by calling the Community Fund and requesting them to ask the NCACD to clean up their language and their website. If the NCACD had two ounces of sense and hoped for future grants, it would have spontaneously issued a correction/apology and a polite press release describing the good work they do. But with the Mail on their doorstep, they were embattled.   What happened instead is that David Blunkett and his special adviser saw their chance for yet another of their regular nasty-story-for-the-Sundays slot. They constructed an inflammatory press release denouncing the grant. Tessa Jowell managed to get her hands on it in time and soften its language a bit, promising to review the grant. But Blunkett fanned the flames into a firestorm led by the Daily Mail, which day after day attacked the Community Fund with incendiary and racist ferocity. The Daily Mail gave a statement to Radio 4's World at One this week claiming that it was "highlighting the activities of the Community Fund with the wholehearted support of the home secretary". David Blunkett hotly denies this.   The Daily Mail's campaign against the Community Fund has on four days urged readers: "Please vent your anger" against Diana Brittan (wife of Sir Leon), head of the fund. Staff have been forced to open 4,000 abusive letters wearing gloves, since some contained excrement, reading "I'm going to kill you", "fucking bitch", "fucking arsehole" and more. The Midland office has had a bomb threat. Falkland's hero Simon Weston joined in with an anti-lottery diatribe at the Tory party conference, complaining veterans had been refused money. Why was he helping slaughter the golden goose, when his own charity, the Weston Spirit, has had 2m of lottery money with another three applications pending?    Not surprisingly, the fund went into meltdown and took too long to respond. Only 5% of its money goes to asylum seekers, 11% to ethnic minorities, and 5% to the third world, but yes, their remit is to give to less cuddly causes neglected by traditional giving. Their instructions are to fill the gaps, not follow popular sentiment. Any fund giving to smaller community groups makes some mistakes. One such was to give money to a man rescuing criminal youth from the streets: alas he was recruiting them to his own criminal gang. Was it the fund's fault? No. The man was an adviser to the police - if even the police didn't know, how could they?   Worse is to come. Next week it is likely the fund will be forced to announce that the NCACD grant will go ahead. Dearly though some might regret it, unless evidence emerges of law-breaking, the promised cash cannot be rescinded. Expect mushroom clouds. Camelot, itself is in trouble after the abysmal failure of their chief executive Diane Thompson's relaunch of new games, had the cheek last week to add petrol on the flames by claiming this asylum seekers' grant had cut lottery sales by 500,000 a week. (She said nothing about Camelot's own foundation's grants to asylum seekers). Camelot has yet to produce figures proving they are not disguising their own failures: Thompson's "you'd be lucky to win a tenner" Ratner remark, about the negligible chance of winning, didn't help.   Now every lottery hater has proclaimed the lottery undemocratic, demanding the right of lottery players to tick a box on their ticket to say where the money should go.   October 31 is the closing date for a public consultation on the lottery. Radical change is needed to repair its reputation, to make it trusted and loved. Jowell is seriously considering nationalisation: the fiasco of the last contract proved that no outsider can ever beat the incumbent. Where there is no competition, it would be wise to make it into a national institution, with no profits lost.   The six distribution boards will be amalgamated into one, with a single national lottery plaque emblazoned on every project that gets money, so people can see where the money is spent. Areas that have had too little funding - too deprived to apply - may get local referenda on how to spend lump sums. Democratic local citizens panels, (already in place for the Heritage Fund) may distribute money more accountably, gaining expertise as they go. When under fire, they would be better trusted to explain their spending decisions.   But big grants over 1m must still be taken centrally. It should not all flow to kittens and cancer at the behest of the tabloids. If the government gave in to pressure for tick boxes, it might temporarily stop tabloid insults about "the liberal, lentil-chomping lefties who hand out Lotto cash".   But granting funds at public whim would be a wicked abdication of the elected politicians' duty to see that all money is as wisely and justly spent as possible - give or take the odd inevitable mistake.