(Adds detail, govt comment, background)

LONDON, Feb 26 (Reuters) - The UK government finally axed controversial plans for Britain’s first Las Vegas-style supercasino on Tuesday as it gave the green light to build a new generation of 16 smaller casinos.

The supercasino was set to be built in Manchester before the idea was effectively killed off by Gordon Brown last July, shortly after he became Prime Minister.

Culture minister Andy Burnham finally confirmed the government was scrapping the idea in a statement to Parliament, ending almost a year of deliberation and confusion.

Plans for the 16 new casinos, still bigger than existing British casinos, were given the go-ahead however.

Eight with 150 lucrative slot machines are earmarked for Great Yarmouth, Hull, Leeds, Middlesbrough, Milton Keynes, Newham, Solihull and Southampton, while Bath, Dumfries and Galloway, East Lindsey, Luton, Scarborough, Swansea, Torbay and Wolverhampton will get smaller casinos with 80 machines.

The government moved to head off legal threats from Manchester and rival bidder Blackpool over the super casino U-turn by promising cash to boost regeneration.

Manchester will get around 10 million pounds while Blackpool will get a total of 300 million pounds, although much of that had already been promised.

Manchester was the surprise winner of a competition to host the supercasino last January, shocking politicians, bidders and industry watchers alike when it beat off rivals Blackpool, Glasgow and London.

But the plans were wrecked two months later when senior lawmakers in Britain’s upper chamber voted against the plan, after lobbying by anti-gambling campaigners, church leaders, supporters of the Blackpool bid and gambling firms with casinos already in Manchester.

Under previous leader Tony Blair, the government envisioned a raft of Las Vegas-style super casinos across Britain to draw in tourists, investment and create jobs in deprived areas.

Manchester City Council estimated the supercasino would have generated 2,700 jobs in its 5,000 square metres of gaming floors and bars and surrounding hotels, cinemas and restaurants.

“LOUSY LITTLE CASINOS”

The supercasino U-turn has riled large U.S. operators.

A top executive of Las Vegas Sands LVS.N told Reuters this month that the 16 smaller casinos were "sub-optimal, lousy little casinos," and the firm wouldn't have "wasted the jet fuel" if it had known that Gordon Brown's government would change its plans.

UK-based Rank RNK.L and privately owned Gala Coral have said they will bid to run at least some of the 16 casinos as have Harrah's-owned London Clubs and Genting-owned Stanley Leisure.

Burnham told Parliament that the government would also consider raising the age limit for casino entry from 18 to 21.

“My instinct says that 21 would be the right age.”

“Having looked at international experiences it would seem that 21 is the age around the world for casino admittance. I would be interested to hear whether there is an appetite in this house to include a similar provision here.”

He also scrapped plans that would have allowed casinos to open 24 hours a day and said that if gambling firms did not stump up a promised 4 million pounds a year to help gambling addicts, then the government would make the payments law.