GORDON Brown is expected throw a lifeline to struggling seaside towns by slashing tax on arcade machines in his Budget speech today.

The Chancellor is likely to cut the tax burden on entertainment and small-scale gaming machines to encourage the survival of beach-side arcades, which are often family run.

The lost revenue would be made up by slapping higher taxes on high-jackpot machines in casinos, including in the new Las Vegas-style gaming resorts on the way.

The move would be a big boon for arcade owners in seaside towns such as Redcar, Saltburn, Whitby and Scarborough.

The leisure industry has long complained that even non-gaming machines - such as video games and quiz machines - are each taxed to the tune of £250 a year.

Arcade owners must pay £715 tax on every class C machine, offering a maximum prize of £25 for a typical 50 pence stake.

Although machines offering a £4,000 jackpot in casinos are more-highly taxed, the difference - they incur a £1,915 bill - is not that great, operators complain. Now that tax burden is expected to fall as the Chancellor instead targets casino operators by raising the tax paid on every limited jackpot machine to about £2,400.

A new charge is expected to leave the new super-casinos paying £5,000 to the Exchequer for every class A machine offering an unlimited jackpot.

The British Amusement Catering Trade Association (BACTA), which represents seaside arcades, said the shake-up would make sense by targeting gambling that was linked to social problems.

Keith Smith, BACTA's chief executive, said: "It would increase the number of machines in arcades by making them more profitable. It would reduce the overhead cost."

The Treasury currently scooped £146m a year from Amusement Machine Licence Duty (AMLD), Mr Smith added.

Mr Brown will unveil his tenth - and possibly last - Budget to the backdrop of the "cash for peerages" sleaze row that has sparked fresh questions about Tony Blair's duty.

The fallout yesterday prompted loyalist Tony Robinson, the Blackadder star who used to sit on Labour's ruling national executive committee, to say the prime minister's time was nearly up.

The Chancellor will try to cheer up Labour MPs by announcing increases to the flagship pension credit, which rewards elderly people with savings.

However, his attempts to portray Britain's economy as recovering have been hit by a new black hole in the public finances, with a £2.3bn shortfall in tax receipts in February.

Analysts predicted the Chancellor would now struggle to keep the annual budget deficit to the £37bn he predicted in his pre-Budget report in December