NEW laws on gambling would enable children to make risk-free bets on which they could reclaim lost stakes but keep any winnings.

Ministers are already being given warning that the loophole threatens to undermine their claims that the Government’s controversial Gambling Bill would provide better protection for children.

The proposed legislation, published this week, states that licensed betting firms would have to “return any money paid” once they realise that it came from someone under 18. However, the Bill goes on to say that these firms cannot demand or require the return of a “prize paid before the licensee becomes aware that the participant is a child or young person”.

Tessa Jowell, the Culture Secretary, has previously insisted that the Bill would prevent the spread of under-age betting, saying that “children and gambling do not mix”.

Officials said yesterday that the measure was designed to be an “incentive for operators to stop children at source”. They pointed out that the proposed legislation would also introduce unlimited fines on companies taking bets from children. Other measures include a maximum fine of £1,000 on people aged 16-18 who get caught betting and there would be stiff penalties for adults who encourage children to gamble.

Charities fear that many young people, as well as unscrupulous adults and parents, would be tempted to take advantage of a law offering the prospect of huge returns on a “high stake, no risk” wager.

There is particular concern about protecting children from internet betting, even though the Government believes that new technology enables these operators to make proper checks on customers’ ages.

Don Horrocks, of the Evangelical Alliance, one of a number of faith groups opposing the Bill, said: “This loophole means that under-age gamblers will flood in. It’s simply stupid. It’s yet another example of an internal contradiction in the Gambling Bill.

“Tessa Jowell is opening a Pandora’s box and if she thinks she can put it all back in when it goes wrong then she is very wrong.”

A spokesman for the British gaming industry said: “This appears to be a ridiculous loophole that undermines the Government’s claims that the Bill protects children.”

Ms Jowell has been taken aback by the furore that greeted publication of proposals for a massive increase in the number of casinos. She is already considering changes to the Bill to prevent children using any form of gaming machines, even of the traditional “grab a toy” kind that feature in seaside arcades.

Jonathan Lomax, of the Salvation Army, said: “We’re calling on the Government to close obvious loopholes and stop children gambling at all. Britain is, and will remain, the only country in the developed world that allows children to play certain types of gambling machines. An NOP poll commissioned by the Salvation Army showed that 82 per cent of the population said that children and young people under 18 should not be allowed to play fruit machines.”

Yesterday, there were fresh claims that the American gambling industry had been given special favours after The Times revealed that Thomas Baker, the chairman of IGT, the world’s largest slot- machine manufacturer, was welcomed into Downing Street for talks about the legislation.

A spokesman for Tony Blair said that the Prime Minister had not met Mr Baker and that Downing Street advisers had listened to arguments from all sides — including charities opposed to the Bill.

The Government has hit back at suggestions that the Salvation Army had meetings only with junior ministers. It insisted that both this group, and other organisations, had met Ms Jowell at least twice. A spokesman also denied that the meeting with Mr Baker had directly influenced policy.

In June, the Government said that it was removing unlimited jackpot Category-A machines from all but the largest “regional” casinos. The move was beneficial to the US operators, who will open up the big resort-style casinos, but 130 high street casinos would no longer be able to offer the machines, which make £50,000 a year each.

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