All this will be realised by the "People's Lottery" he told delegates at a conference organised by the magazine, Lottery Monitor, in London.
He stressed the shift in emphasis - from building projects to people - which was outlined in the Government's White Paper on the lottery published last July.
In line with this shift the Government decided to set up the New Opportunities Fund for after-school clubs, healthy living centres and new technology training for teachers. The fund will be given Pounds 1 billion which critics claim will mean less for the original five good causes of sport, the arts, heritage, charities and the millennium.
But Mr Smith said he wished to "dispel the misconceptions about robbing the old good causes to fund the new". The lottery was expected to generate Pounds 1 billion more than the Pounds 9bn predicted in its first seven years, he said, and this extra cash would be used to set up the National Endowment for Science, Technology and the Arts (NESTA) and the New Opportunities Fund.
But Derek Casey, chief executive of the English Sports Council, said some of his projects would be have to be delayed.
Lord Gowrie, chairman of the Arts Council, warned: "The exciting and delicious feast of the lottery is accompanied by a funding famine." He feared that the Government would continue to cut the Arts Council's grant in the way the Conservatives had done. But he was heartened by Mr Smith's pledge to "fight his corner" with the Chancellor "The council cannot cope with a continuing haemorrhaging of treasury funding."
Mr Smith also promised to keep "a strong and abiding commitment to the the principle of additionality", which means that lottery money would not be used to replace core funding.
He said the new fund would focus on out-of-school activities involving children in sport, drama and the arts. Homework would also be tackled to help children gain in self esteem and motivation.
Mr Smith hoped that half of secondary schools and a quarter of primaries would have after-school clubs by 2001. And he wanted all 500,000 teachers and 10,000 librarians to know how to use new technology by then.
Procedures for making a bid for New Opportunities money would be flexible and the "matching funding" schools would have to find would be as low as 5 per cent.
The White Paper will be turned into a Bill to be enacted by next summer.
The fund will draw on good practice exemplified by the Kids' Club Network and BT's project in Bristol where 11 schools were supplied with leading-edge technology and 450 teachers were trained to use it.