Media playback is unsupported on your device Media caption What are fixed-odds betting terminals?

The maximum stake on fixed-odds betting terminals (FOBTs) will be reduced to £2 under new rules unveiled by the government.

Currently, people can bet up to £100 every 20 seconds on electronic casino games such as roulette.

Culture Secretary Matt Hancock called the machines "a very serious social blight" that "needs to be tackled".

But bookmakers have warned the cut could lead to thousands of outlets closing.

FOBTs generate £1.8bn in revenue a year for the betting industry, according to the Gambling Commission, and taxes of £400m for the government.

The Department for Digital, Culture, Media and Sport said that in order to "cover any negative impact on the public finances" it would increase the Remote Gaming Duty, which is levied against online casino-type games such as blackjack.

The current rate operators must pay is 15% compared with a 25% tax on FOBTs. The government will announce the rise in the Budget.

'Political decision'

William Hill, which generates just over half its retail revenues from FOBTs, described the £2 stake limit as "unprecedented" and warned that 900 of its shops could become loss-making, potentially leading to job losses.

It said its full-year operating profit could fall by between £70m and £100m.

Mr Hancock said: "Sometimes in politics you have the chance to really do something to help people and, in particular, this case to help some very vulnerable people - hundreds of thousands of people who lose thousands of pounds on these machines."

But Betfred's managing director Mark Stebbings claimed the government had "played politics with people's jobs" and the move was "clearly not evidence based but a political decision".

"This decision will result in unintended consequences including direct and indirect job losses, empty shops on the High Street, and a massive funding hit for the horseracing industry."

Sports Minister Tracey Crouch said: "We respect and understand that this may have an impact on jobs in bookmakers… we are working closely with the industry [for them] to be able to grow and contribute to the economy."

The government said the stake limit would come into effect some time next year, but would not set an exact timetable.

Tom Watson, the shadow culture secretary, told the BBC: "The great tragedy of this is [that] for five years now pretty much everyone in Westminster, Whitehall and in the country has known that these machines have had a very detrimental effect in communities up and down the land."

Analysis

by Amol Rajan, BBC media editor

Image copyright PA

In taking the most drastic of the options available to them on FOBTs, the government has indicated that gambling is on a journey much like nicotine a generation ago.

Many addictive behaviours chart the same course. First, they are commonly accepted, then victims speak out and a campaign is launched. Finally, new laws catch up with a shift in public sentiment.

Industry figures argue that what is at stake is not only jobs and revenues for the Exchequer, but the principle that in a free society fully informed adults should be free to spend their money as they choose, so long as it doesn't harm others.

Campaigners have successfully argued that the harm to communities and individuals is severe enough to warrant a major change.

It's vital to remember that, while FOBTs understandably grab the headlines, this review also looks at the radical shift of the industry online.

There many addicts who find there is no respite, and children with smartphones are potentially exposed.

Tighter regulation of online gambling is the next battle campaigners intend to win.

The government's consultation into gambling machines found consistently high rates of problem gamblers among players of FOBTs "and a high proportion of those seeking treatment for gambling addiction identify these machines as their main form of gambling".

Anti-gambling campaigners have condemned the machines, saying they let players lose money too quickly, leading to addiction and social, mental and financial problems.

Media playback is unsupported on your device Media caption Terry White lost up to £15,000 per day on fixed-odds betting terminals

Matt Zarb-Cousin is now a spokesman for the Campaign for Fairer Gambling but was previously addicted to FOBTs.

"It's no exaggeration to call FOBTs the crack cocaine of gambling," he has told the BBC.

"If we had a gambling product classification, similar to that of drugs, FOBTs would be class A."

William Hill chief executive Philip Bowcock, said: "The government has handed us a tough challenge today and it will take some time for the full impact to be understood."

GVC Holdings, which owns Ladbrokes, said it expected profit to be cut by about £160m in the first full year that the £2 limit is in force.

However, Peter Jackson, chief executive at Paddy Power Betfair, welcomed the government intervention, saying his company had been concerned that FOBTs were damaging the reputation of the gambling industry.

The British Horseracing Authority (BHA), which receives millions of pounds from bookmakers through a levy, said it would work closely with the government to respond the decision.

Problem gambling

FOBTs are not the only culprits when it comes to problem gambling.

A survey conducted by social research agency NatCen found the top five activities with the highest proportions of problem gamblers were:

Spread betting, where bets are placed on whether an outcome will be above or below an offered range (20.1%)

Betting exchanges, where your bet on the outcome of an event is matched with someone with the opposing bet (16.2%)

Playing poker in pubs or clubs (15.9%)

Betting on events with a bookmaker, not online (15.5%)

Playing machines in bookmakers, including FOBTs (11.5%)

The most popular types of gambling in the country - National Lottery draws, other lotteries and scratchcards - are associated with the lowest levels of problem gambling.