The prime minister has defended the government's controversial plans to liberalise gambling laws.

Tony Blair told reporters at his monthly press conference that plans to open the door to dozens of major casinos across the country were sensible.

"It is very important that we modernise regulation of the gambling industry and that is what this bill will do," he said.

"This bill will give local councils the option to bring in businesses into areas that desperately need social regeneration and the majority the turnover of those businesses will not be from gambling.

"I understand that people have concerns but we must demonstrate to them in the next few days that this bill will actually help us control gambling carefully."

Cabinet rifts

Earlier it was reported that the chancellor was furious over claims that large American casino operators were offered tax breaks to invest in the UK.

The Times reported that government officials have secretly offered to cut taxes on gambling by more than half.

Frank Fahrenkopf, the head of the American Gaming Association, was said to have said government officials proposed to cut taxes on gaming from 40 per cent to between 15 and 20 per cent.

Jowell also told Labour MPs in a briefing note the bill would be "revenue neutral", meaning no additional tax would be raised.

But Fahrenkopf told the BBC on Monday that "no commitment was made to me by any MP or any member of the Blair government that there was going to be a reduction" in gambling taxes.

And the prime minister said that any claims to that effect was "nonsense" and that no such offer had been made.

He also appeared to rule out moves towards limiting the number of "super casinos" that can be built.

Blair said local councils would have the power to decide on new developments.