The Federal Government has withdrawn funding for the national peak body representing the alcohol and drug treatment sector, forcing the immediate closure of the 50-year-old organisation.

The Alcohol and Other Drugs Council of Australia (ADCA) was told late yesterday that its core funding would be halted as part of the Government's budget deficit reduction strategy.

The news forced the council's board to take drastic action by placing itself in voluntary administration.

The Labor government had promised the council increased funding until 2015. By cutting the current funding, the Government will save itself around $1.5 million a year.

Chief executive David Templeman says the ACDA is a body with a proud tradition of providing frank and fierce, evidence-based policy advice to governments.

"Sometimes we do have to be very forceful - 75 per cent of our community know that we have a fundamental problem in Australia with alcohol-related harm. All governments need to listen to that," he said.

Former Liberal MP and chairman of the ADCA board, Dr Mal Washer, says the board was surprised the Federal Government acted so quickly.

"We were hoping we'd get funding until the Government had finished the reviews through the whole sector," he said.

"I can understand when a new government comes in and funding's tight. And need to review what agencies they fund are doing. But you would have hoped that we would have got funding until that review was completed."

Mr Templeman says the council would have liked more clarity from the Assistant Health Minister, Fiona Nash, about the decision.

"It's quite unfortunate that Minister Nash hasn't been directly engaged with board members herself," he said.

Mr Templeman says it is not for the Government to say whether ADCA's positions on harm minimisation, decriminalisation of some drugs, and alcohol floor pricing has influenced the Coalition's decision.

However, he said: "Certainly the ADCA has been in existence for nearly 50 years, providing that contestable, frank and fearless advice as part of the debate."

Mr Templeman says the benefits that his organisation provides to the community outweighs the cost to the federal budget.

"And I was talking this morning to a specialist obstetrician colleague of mine who said: 'Heavens, a $1.5 million cost ADCA each year'," he said.

"And yet in his estimation, to manage and care for a fetal alcohol spectrum baby would cost probably between $10-15 million in their lifetime."

Indigenous council 'left in wilderness, floundering'

The news has also shocked the council's 350 odd members, one of which is the Aboriginal Drug and Alcohol Council.

Director Scott Wilson says ADCA's absence will leave his organisation without a voice in Canberra.

"There is no other peak body by the way for Indigenous drug and alcohol groups in Australia," he said.

"Again we're out in the wilderness, floundering."

Mr Wilson says the news has also left many in the sector nervous about which other organisations might be next on the chopping block.

"When I heard about ADCA yesterday, I have to be honest, I was worried about the organisation I work for," he said.

The chief executive of treatment centre Odyssey House, James Pitts, says the alcohol and drug sector needs some clarity from the Government.

"Certainly for me the first thing that I started thinking about is the statement from the Deputy Health Minister - the fact that this was the mechanism to try to lower the budget deficit," he said.

"And so our concern now is that OK, if they did, is this a signal to all of us that there may be some cuts in the future?

"Or is the Government saying that as far as peak bodies are concerned, that they don't see the need for them?"

A statement issued by Senator Nash's office says the Government has been advised that the council has experienced financial difficulties and the Government will assist in covering its debt where appropriate.