You have got to hand it to the arts world. No sooner has the Prime Minister hailed record public investment leading to a "quiet revo lution" and a "golden age" for culture in this country than the critical onslaught begins. For the composer and conductor Peter Maxwell Davies, Tony Blair is a "philistine". The critic A N Wilson describes our cultural policy as the "moronisation" of Britain, and the director of the National Theatre, Nicholas Hytner, lambastes our "spectacular lack of logic" for trans ferring Lottery money from the arts to help fund the 2012 Olympics.

Where did it all go wrong? In fact, it didn't go wrong at all. The leaders of the arts world, rightly, are hard-wired to be sceptical about governments and politicians. Because of this - and their innate creativity, of course - they form an exceptionally eye-catching lobby, and slagging off the personal cultural preferences of ministers is part of that package. But the recent argument about funding, and the way it swiftly tumbles into a debate about the arts versus sport, need to be tackled.

The fact is that the National Lottery has always been geared towards one-off projects and other things that routine public investment couldn't reach. The 2012 Olympic and Paralympic Games are a classic example of this. That is why we made it clear from the start that we would use the Lottery as part of the funding package. However, we have also made it plain that no existing Lottery project will be cut. The diversions we make will be time-limited and will amount to £28m per year for the arts. That is just 5 per cent of the total income for the arts across those 48 months. Other Lottery distributors will be making contributions along the same proportions.

There will be a payback, too - not only in cash terms when the Olympic land and buildings are eventually sold, but also from the cultural elements of the 2012 package. The central plank of this will be the Cultural Olympiad, which will start in 2008 and run through to the Games in 2012. The Olympiad - like the Olympic and Paralympic Games - must be a world-class event.

I want us to get beyond what is normally thought of as a culture festival. The Olympiad has to tap into a real sense of national community. For the Live Sites initiative, we are going to try to get a big open-air screen in as many towns and cities as we can. London 2012 will be the first Olympic Games for the MySpace generation, so there will be a number of "routes in", in addition to the standard television coverage of the opening and closing ceremonies and the Games themselves.

Live Sites will not be simply a string of public venues at which people can watch the Olympics - they will also be temporary screens and stages for local arts performances and events. That is one incredibly simple way of allowing people all over the country to enjoy what is going on elsewhere. I want it to be rather like an extension of the hugely popular Proms in the Park idea, which has transformed the Last Night of the Proms from a televised concert at the Albert Hall to a genuinely interactive musical experience for cities up and down the country. I hope that Live Sites will become an entry point for everyone for both the Olympiad and, later, the Olympic and Paralympic Games themselves.

The Olympiad will also play to our obvious cultural strengths and heritage. The International Shakespeare Festival will provide a forum for modern interpretations using film, music and the visual arts. It is often said, and rightly so, that our language and literature are this country's greatest contributions to the culture of the world. So it seems only right that the greatest exponent of English should be centre stage when the world spotlight shines on the UK.

A nationwide International Museums Exhibition will give foreign curators the opportunity to reinterpret our national collections from a global perspective. In this way, our culture will be mirrored back to us through others' eyes, addressing questions such as: "What does our cultural heritage mean to the rest of the world?" and "How does the world view us?" I hope 2012 will be an opportunity to find new and interesting places to mount exhibitions that tell our island story in new ways and to new people.

These are only three of our ideas, and plenty more will be unveiled in the weeks and months to come. The Cultural Olympiad - like the Games themselves - must be the very best that we can all come up with. We've got the time and the resources to do it. The greatest show on earth is not just going to take place in the sports stadiums of Britain.

David Lammy MP is the minister for culture