BIG teddy bears which drop out of arcade 'grab' machines are facing the chop in Morecambe.

The Government has deemed that they lure kids into gambling at an early age - and wants to see the size of fluffy bears in machines reduced.

The threat comes as part of the new Gambling Bill, which will pave the way for 24 hour Las Vegas-style casinos promising huge cash prizes. But it also wants to get tough on seaside arcade machines.

Lancaster University produced one of the reports which The Department for Culture, Media and Sport used while preparing the Gambling Bill.

The department of applied social science looked into the issue of children and gambling.

Owners of arcade companies in Morecambe say if the Government gets its way it will be the final nail in Morecambe's coffin'.

"We are totally against it as the nature of seaside arcades is that they are family orientated," says Robert Mcintyre, of the Alhambra Leisure Centre, on Marine Road West, in the resort.

"The old fashioned seaside arcades will be hit hard because we cater for families. It is tradition but we would lose a large proportion of our customer base."

Mr Mcintyre, who has been manager at the Alhambra since 1977, after the pier in the resort burned down, says he has no doubt that trade will drop.

But he does not think that the Government's idea of reducing the size of prizes will stop kids from gambling.

"There is less and less in Morecambe each year. Frontierland has gone and so have the theatres. It is being shut down and if the bill goes ahead it will spell disaster for the resort," he says.

Geraldine Smith, MP for Morecambe and Lunesdale, has called the clause in the Bill crazy'.

She told the House of Commons last week: "While the Government is saying that people can play category A machines in mega-casinos, it is giving the Secretary of State a reserve power to ban children from playing category D machines and winning cuddly toys? It is an example of the nanny state gone mad."

The Department of Culture, Media and Sport says young people should still be allowed to play at arcades but the prizes should be smaller.

The British Amusement Catering Trades Association the body representing the pay-to-play leisure industry - says any reserve powers will stifle investment by seaside businesses.

Association president Tim Batstone says: "The reserve power is a Sword of Damocles hanging over us. The Government itself says there is nothing wrong with children playing category D machines, so why have the reserve power?"