Gamblers will be able to bet more and win bigger prizes on slot machines in pubs, clubs and amusement arcades after successful lobbying of the Government by the gaming industry.

Prizes will double from £35 to £70 and the maximum stake will rise from 50p to £1, the second rise in two years, under the plan authorised by Andy Burnham, the Culture Secretary.

The relaxation of gambling rules is expected to provide a boost to the industry in the downturn by generating an extra 20 per cent in revenue. The Treasury will also benefit from an additional £27million a year in VAT. However, critics fear that it will increase levels of gambling addiction.

Ministers were originally going to raise the maximum stake to 60p and the prize limit to £60 but ministers were told by the gambling industry that this would not be enough to reinvigorate the market.

There were questions last night about the morality of encouraging people to gamble more during a recession. Anna Drew, a spokeswoman for the Methodist Church, said: “We would be concerned that any increase in stakes and prize limits might be likely to increase the amount that people risk and the amount they would want to chase. People do chase their losses on slot machines — they pump their money in to get back the £5, £10 or £20 they have already spent.

“Britain has around a third of a million problem gamblers according to GamCare, and we wouldn't want to see that increase.”

Gordon Brown was condemned last week by five senior bishops for policies that they said encouraged greed and a love of money. Yesterday he dismissed “moralistic” objections to attempts to encourage spending through the downturn, insisting that action was necessary “if an economy is not moving”.

The change to gambling rules comes despite the Prime Minister's personal distaste for gambling, because of which he blocked proposals for a supercasino in Manchester.

However, over the summer it was announced that bingo halls could double their number of £500 prize machines from four to eight.

According to a government consultation document seen by The Times, the Culture Department agreed to the latest increase in prizes because “many operators across the gambling industry are finding trading conditions very difficult in the present economic climate”.

Britain already has one of the most relaxed regimes for slot machines. Around the world 82 per cent to 98 per cent of the money that is wagered by players is paid out in prizes; in Britain a statutory minimum limit of 70 per cent was abolished in September 2007.

The Gambling Commission said that a £1 stake “would not increase problem gambling” providing that appropriate controls were put in place, prompting Emanuel Moran, a specialist adviser on pathological gambling at the Royal College of Psychiatrists, to question whether the regulator was tough enough.

There are about 80,000 slot machines in pubs. The Gambling Commission said that 14 per cent of people had used them in the past year. A third of users are under 24, with men more likely than women to play. The estimated turnover of the gaming machine industry is £10.3billion, of which £8.2billion is paid in prizes.

However, the number of machines being manufactured has fallen by 55 per cent since 2005 and revenue in arcades is down by 21 per cent since June 2007. Pubs are also affected. The British Beer and Pub Association says that income from machines accounts for up to 15 per cent of profit in smaller premises and 68 per cent in larger venues.

The Department for Culture, Media and Sport said that the Gambling Commission would enforce tough codes of practice to protect the consumer. “The protection of children and vulnerable people is at the heart of the Gambling Act and this remains our priority,” a spokesman said.

Times Recommends

• Sarah Brown says 'no thanks' to veal at G8 - twice
• Stockton-on-Tees is obesity capital of Britain
• Stores blame poor sales on Murray factor