Middlesbrough’s casino plans looked doomed last night after the Government said there could be a High Court challenge if it was approved.

The scheme – aimed at bringing at least GBP 10m worth of investment and 300 jobs to the town – has been in limbo since a House of Lords vote two months ago.

Peers voted down an order to build Britain’s only „super-casino“ in Manchester, and blocked licences for 16 smaller gambling sites, including in Middlesbrough and Scarborough.

Since then, Culture Secretary Tessa Jowell has been under growing pressure to allow the 16 to go ahead without Manchester.

But a Government Minister has now warned that the plan was a non-starter, because the 17 licences can only legally be accepted or rejected in their entirety.

Lord Davies told peers calling for the split that they must „live with the consequences of this action.“

The alternative to splitting the order is to bring forward legislation to overturn the Lords defeat and assert the supremacy of the elected Commons.

But Tony Blair leaves Downing Street in less than four weeks, and his successor, Gordon Brown, is cool on casinos, doubting their ability to regenerate struggling areas.

Whitehall sources say the Chancellor has signalled he will not tackle the issue in his crucial first few months.

The deadlock means Middlesbrough council cannot press ahead with tendering for a 1,500sq metre casino, with 150 slot machines and GBP 4,000 jackpots.

Expected to open by spring 2010, and featuring restaurants, bars and a hotel, it is planned for the regenerated Middlehaven site or Middlesbrough Leisure Park, in Marton Road.

A Middlesbrough Council spokeswoman said: „We are awaiting the Government’s next move. They are saying they are still committed to the legislation, so further speculation will achieve nothing.“

Scarborough, in North Yorkshire, is another winner-in-waiting, grabbing one of eight licences for a small casino, with 80 slot machines.

There was anger when Manchester was selected for the Las Vegas-style supercasino with unlimited jackpots, ahead of the favourite Blackpool.

The Government had already bowed to pressure from the Tories and many of its own backbenchers by agreeing that only one supercasino would be opened as a pilot.

Before the vote on March 28, Ms Jowell warned that a defeat for the Government would kill off the casinos because there was „no plan B“.