British casinos say the government plan will cost them us$ 237 million

Lawyers for the British Casino Association, which represents most of the country’s existing 138 casinos, told Justice Langstaff that in drawing up the expansion policy, Tessa Jowell, the culture secretary, had "failed to comply with her duties of fair consultation".

Her final policy had "departed radically" from a position of parity between the existing casino operators and the new entrants, creating an inequality that was "potentially seriously damaging" to the former’s commercial interests, claimed Michael Beloff, QC, appearing for the BCA. Jowell had "created a situation in which existing casinos are condemned tosecond-class status", added Beloff .

The BCA and its members are pursuing a legal challenge to the proposed gaming expansion plans and are asking the court to order that Ms Jowell reconsider the so-called grandfathering arrangements so that all comparable casinos can compete fairly.

If the challenge succeeds, one option for the government would be to relax restrictions on existing casinos - but that could be controversial.

The gaming expansion policy also faces a political challenge caused by a surprise House of Lords defeat two months ago for the proposed siting of the supercasino in Manchester and the 16 smaller casinos elsewhere. Yesterday Don Foster, the Liberal-Democrats’ culture spokesman, said: "This could all have been avoided if ministers had listened to those of us who pointed out that the new proposals would unfairly hit existing casinos," he said.

At the heart of the BCA’s judicial challenge is a complaint that the 17 new casinos will be allowed to offer much larger numbers of gaming machines and so-called section 21 machines - a type of electronic slot machine generally involving lower stakes and prizes - as well as bingo and betting.

Beloff told the judge yesterday that as much as 50 per cent of provincial casinos’ profits came from machine-based gambling and that this was "essential to the commercial viability of the existing casinos". But since many of the new casinos would be operating in the same catchment areas as the existing facilities, there would be competition for gamblers’ business and the new operators would have an unfair advantage, he claimed.

The BCA estimates that 85 existing casinos fall within the catchment areas of the proposed new facilities. The judicial review, which is expected to last three days, continues.