The maximum stake on a fixed-odds betting terminal (FOBT) is to be reduced from £100 to £2.
The maximum stake on a fixed-odds betting terminal (FOBT) is to be reduced from £100 to £2.
The move follows a lengthy consultation about the machines - branded the "crack cocaine of gambling" by critics - and will come as a major blow to bookmakers, who argued that a dramatic cut would lead to job losses.
The Government said that the change was designed to reduce the potential for large losses and cut the risk of harm to both players and the wider community.
Culture Secretary Matt Hancock said: "When faced with the choice of halfway measures or doing everything we can to protect vulnerable people, we have chosen to take a stand.
"These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all."
The announcement was made by sports minister Tracy Crouch, who said: "Problem gambling can devastate individuals' lives, families and communities.
"It is right that we take decisive action now to ensure a responsible gambling industry that protects the most vulnerable in our society. By reducing FOBT stakes to £2 we can help stop extreme losses by those who can least afford it.
"While we want a healthy gambling industry that contributes to the economy, we also need one that does all it can to protect players.
"We are increasing protections around online gambling, doing more on research, education and treatment of problem gambling and ensuring tighter rules around gambling advertising.
"We will work with the industry on the impact of these changes and are confident that this innovative sector will step up and help achieve this balance."
Other measures announced by the Government include:
- The Gambling Commission to toughen up protections around online gambling including stronger age verification rules and proposals for customer spending limits;
- A multimillion-pound advertising campaign promoting responsible gambling;
- Responsible gambling messages to appear for the duration of all TV adverts;
- A Public Health England review of the public health harms of gambling;
- A review of age limits for National Lottery games at the time of the next licence competition.
Labour's deputy leader Tom Watson told BBC Radio 4's Today programme he was "absolutely delighted" by the decision, which he said would "help alleviate some of the terrible misery caused by problem gambling in Britain".
Mr Watson said he hoped job losses could be avoided.
"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 and the bookmakers have chosen to take a defiant approach and try to face down Parliament with a very aggressive campaign," he said.
"The bookmakers themselves many years ago should have been diversifying, should have been investing in horse-racing, should have realised the harm done by these machines. They've only got themselves to blame when the Government has listened to public opinion.
"They've really boxed themselves into a corner, but I would hope that now that we've got this decision, the bookmaking companies will be able to make sure there is investment in other forms of recreational gambling that don't have such addictive qualities."
The chief executive of amusement machine industry trade body Bacta, John White, said: "We warmly welcome this announcement.
"A stake reduction to £2 has long been needed to protect consumers from the harm caused by FOBTs.
"This is a decision that puts player protection first, and will allow the gambling industry as a whole to move forwards and create a safer, more socially responsible environment for consumers.
"It is a testament to the wide-ranging campaign for stake reduction from concerned individuals and organisations across politics, public health and the wider gaming sector. The Government has made the right decision and it now needs to be implemented without delay."
The Bishop of St Albans, Alan Smith - who played a leading role on behalf of the Church of England in the campaign to cut the maximum stake on FOBTs - welcomed the decision.
He said: "Fixed-odds betting terminals are a scourge on high streets that have taken advantage of the vulnerable for too long.
"I am very glad the Government agrees that a £2 stake is an essential part of the solution.
"Of course, there is more work to be done, but the Government has made the right decision.
"I would like to thank the Prime Minister and her Government, particularly Minister Tracey Crouch MP and Secretary of State Matt Hancock MP for their admirable moral leadership."
Bookmaker William Hill warned the decision could see around 900 of its betting shops become loss-making, with a "proportion" at risk of closure shortly after the new £2 limit comes into effect.
The group said the stake cut could also hit annual earnings by between £70 million and £100 million.
Philip Bowcock, chief executive of William Hill, said: "William Hill has a long and proud heritage as part of the UK high street and we know how important betting shops are to our customers and their local economies.
"The Government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing.
"We will continue to evolve our retail business in order to adapt to this change and we will support our colleagues as best we can.
"Despite the challenges presented by this decision, our teams will compete hard and offer great service to William Hill customers."
A spokesman for Fairer Gambling said: "Allowing high stakes roulette machines in such an easily accessible environment has had disastrous consequences, impacting levels of gambling related harm and crime.
"The Government's decision to cut the stake back to £2 is the right one, and we commend the work of Tracey Crouch, the minister who pushed for this review, and Carolyn Harris, who led the All Party Group against FOBTs.
"The evidence shows this policy will reduce harm for those experiencing it, and eliminate the most addictive roulette content, significantly reducing problem gambling associated with FOBTs."
Swansea East MP Carolyn Harris, one of the leaders of the parliamentary campaign for reform of laws governing FOBTs, said she was "really delighted" by the announcement.
"This is something I, and many others, have long campaigned for," said Ms Harris.
"FOBTs have caused too much social harm and huge losses for those who can least afford it. Last year there were more than 230,000 individual sessions in which a user lost more than £1,000.
"These machines have increased the risk of problem gambling which carries a very significant social and economic cost.
"This was morally the right decision to make and it is victory for all those people whose lives have been blighted by these toxic machines."
Paddy Power Betfair welcomed the move to help improve the sector's image, but warned it could hit its gaming revenues by between £35 million and £46 million.
The hit to its profits could be offset by factors including gamblers switching to other games, as well as benefits from less competition as rivals are forced to merge, it said.
Peter Jackson, Paddy Power Betfair's chief executive, said: "We have previously highlighted our concern that the wider gambling industry has suffered reputational damage as a result of the widespread unease over stake limits on gaming machines.
"We welcome, therefore, the significant intervention by the Government today, and believe this is a positive development for the long-term sustainability of the industry.
Tom Watson later said in a statement: "This announcement signals the end of the reign of destruction and misery that FOBTs have brought on the lives of gambling addicts and their families and communities for too many years.
"It is a victory for cross-party campaigners who have worked tirelessly for this day over many years.
"This won't be a silver bullet for the wider epidemic of problem gambling in the UK but it will go a long way to solving what has been a particular evil for too long.
"It's not often that the Opposition congratulates a Government minister, but Tracey Crouch has made the right decision today."
Mr Hancock said that the Government has not yet set a timetable for the change, telling BBC Radio 4's Today programme: "We are going to work with industry on the timings to make sure that the technology can be changed.
"We are going to get on with it. There will be a need to put measures through Parliament, and we want to make sure that it's done effectively."
Asked whether the change would be completed within a year, he said: "I'm not going to set out an exact timetable because today we're announcing a decision and then we're going to work with the industry to make sure that's implemented effectively."
Shares in gambling firms tumbled following the stake cut decision.
William Hill fell 5% in the FTSE 250 Index and FTSE 100-listed Paddy Power Betfair fell 2%.
Fellow gaming group 888 Holdings dropped 6%, with GVC Holdings off 4% and Playtech 2% lower.
Neil McArthur, chief executive of the Gambling Commission, said: "We're pleased the Government has supported a comprehensive package of measures to protect consumers, and that this includes a substantial stake cut.
"Whilst we welcome the reduced stake, that alone will not be enough to address the risks of harm that can come from all forms of gambling.
"That is why we will continue to act in other ways to reduce those risks - including delivering enhanced consumer protection for online gambling in the areas of customer verification, fairness and interaction, implementing strong penalties for businesses who breach advertising guidelines, and reviewing gambling product characteristics to identify whether particular features pose greater risk of harm than others."
The Association of British Bookmakers said: "This is a decision that will have far-reaching implications for betting shops on the high street.
"We expect over 4,000 shops to close and 21,000 colleagues to lose their jobs.
"The independent expert advice warned that this would simply shift people, the majority of whom gamble responsibly, to alternative forms of gambling where there is less chance of human interaction and its impact on problem gambling levels is far from certain.
"As the industry adjusts its business model, those shops that do survive will continue to provide a safe place to gamble with staff interaction and industry leading responsible gambling measures and support British sport."
Brian Chappell of Justice for Punters said: "This is a huge decision, because the Government has finally recognised that problem gambling is a public health issue that is costing more than the tax income received from gambling.
"These machines were introduced through the back door on to UK high streets. They've been trouble ever since. This decision means the betting shop environment will become safer for staff and customers."
Liberal Democrat FOBTs campaigner Lord (Don) Foster, said: "It has taken the Government an eternity to reach this decision but it is finally the right one.
"Reducing the stake to £2 provides more protections to those that can easily get addicted to these machines.
"This is a victory for more responsible gambling and will hopefully reduce the damage that these machines are proven to do."
Tony Franklin, a former betting addict and campaigner for the Gambling Hurts pressure group, told Today: "Today's announcement by the Government is a victory for common sense and a victory for all the problem gamblers and their families who have been impacted by fixed-odds betting terminals on the High Street.
"I hope that this decision sends shivers across the industry, that if you extract money from the poor and vulnerable you will ultimately be held accountable."
Christopher Snowdon, head of lifestyle economics at the Institute of Economic Affairs, said: "Today's announcement shows that you can get anything banned in this country if you whine for long enough.
"Make no mistake, reducing the stake to £2 amounts to a ban. The machines will be taken out of bookmakers and players will move online where there are no limits on stakes or prizes.
"Hundreds of bookmakers will close, thousands of jobs will be lost and the horse-racing industry will lose millions of pounds in subsidies. Taxpayers will then have to fork out £400 million to fill the gap in the Treasury's balance sheet.
"For what? To deal with a moral panic over something that accounts for just 14% of Britain's gambling expenditure. There has never been any evidence to support this campaign. The Government is weak and cowardly to have given in to it."
Ms Crouch, delivering a statement on the proposals in the Commons, said the Government had concluded that only by "reducing the maximum stake from £100 to £2 will we substantially impact on harm to the player and to wider communities".
She said the decision would "mitigate risk for the most vulnerable players for whom even moderate losses might be harmful".
Mr Watson, responding for Labour, welcomed the decision, telling MPs: "Cutting the maximum stake on FOBTs is a big step in the right direction but it's just one part of the puzzle."
He urged the Government to "bring a new Gambling Act fit for the purpose it requires in the digital age".
Ms Crouch, replying to SNP MP David Linden, said she expected the regulations will come before Parliament later this year.
She told the Commons: "Mr Speaker, I know that yourself and members of this House will recognise there is a process we have to go through.
"We expect the regulations to come before the House later this year and then with a reasonable time of implementation following that."
Former Conservative leader Iain Duncan Smith, who has campaigned on FOBTs, welcomed the Government decision.
"It is clear FOBTs lead to significant social harm and huge losses for those who can least afford it," said Mr Duncan Smith.
"Small wonder they have become known as the crack cocaine of the betting industry.
"Reports of the losses to the economy following this stake reduction are exaggerated and an example of bookmakers placing corporate profit ahead of public well-being.
"This was the right decision to make for all the people and families who have been harmed by these machines."