Reeves urged to hike gambling taxes to fund axing two-child benefit cap

Rachel Reeves is under growing pressure to raise taxes on gambling firms to cover the cost of lifting the two-child benefit cap.

More than 100 Labour MPs have signed a letter to the Chancellor as she prepares for the autumn Budget, urging her to scrap the limit long blamed for keeping children in poverty.

This could be paid for with a “targeted levy on harmful online gambling products”, which would “support the government’s manifesto pledge to reduce gambling-related harm and enable vital action to alleviate child poverty”, the MPs wrote.

They argued that the UK’s effective tax rate on remote gambling “is significantly lower than in many comparable jurisdictions”.

Betting companies “remain highly profitable”, they said, while employing relatively few people and often basing operations offshore to lower their tax bills.

Consumer spend on gambling brings little value to the UK economy as a whole, they added.

The parliamentarians cited a report by the Institute for Public Policy Research, backed by former prime minister Gordon Brown, which said reforms to gambling levies could generate the £3.2 billion needed to scrap the two-child limit and benefit cap.

The think tank suggested increasing taxes on online casinos from 21% to 50% and raising those on slots and gaming machines, from 20% to 50%.

The Times reported on Wednesday that the child poverty taskforce, set up by Sir Keir Starmer, will recommend lifting the two-child cap.

The recommendations are expected before the Budget, although the report has previously been delayed. Lifting the cap was said to be its top recommendation.

In a statement the Department for Work and Pensions (DWP) said the child poverty taskforce would publish an “ambitious” strategy aimed at the causes of child poverty.

A Government source said work remained ongoing and no final decisions had been made.

During a visit to Telford on Thursday, Ms Reeves said: “Of course as a Labour Chancellor I’m determined to lift children out of poverty and we’ve made a commitment that in our time in office there will be fewer children in poverty at the end of this parliament than at the beginning.”

She added: “The child poverty task force is doing its work at the moment. That will report shortly and of course I will respond in the Budget. Am I determined to lift children out of poverty? Absolutely.

“That is what Labour chancellors do and that’s what this Government will do as well.”

Alex Ballinger, signatory of the letter and member of the All-Party Parliamentary Groups on gambling reform, said: “No child should grow up in poverty while gambling companies make record profits.

“Gambling harms are increasing, yet gambling is VAT exempt.”

The two-child benefit cap, widely unpopular among Labour members, remains in place more than a year after Labour took office, making it a key issue at the party conference starting in Liverpool on Sunday.

The issue has also been central to the contest to succeed Angela Rayner as deputy leader, with both candidates Bridget Phillipson and Lucy Powell suggesting the limit should be abolished.

The policy was announced in 2015 by the then-Conservative government and restricts child tax credit and universal credit to the first two children in most households.

Education Secretary Ms Phillipson’s comment that scrapping the “spiteful” cap is “on the table” has been seen as a clear sign that ministers are considering the move.

Ms Reeves on Monday also said the changes were “on the table”.

Speaking to ITV before the MPs’ letter was sent, the Chancellor said: “I didn’t need MPs or former chancellors to tell me to launch an inquiry into gambling taxation.

“I did that as Chancellor, and I’ll set out the plans on the taxation of gambling – and indeed of other areas – in my Budget on November 26.”

Mainstream, the Labour campaign group backed by mayor of Greater Manchester Andy Burnham, has also supported the scrapping of the policy.

On Thursday, Mr Burnham himself told the Guardian the policy was “abhorrent” and “the worst of Westminster”.

Arguing the cap “cannot be justified”, he added it had been introduced by politicians who “don’t deal in the real world and have these myths of families: ‘Oh, yeah, they’re all having kids for benefits’.”

A DWP spokesperson said: “Every child, no matter their background, deserves the best start in life. That’s why our child poverty taskforce will publish an ambitious strategy to tackle the structural and root causes of child poverty.

“We are investing £500 million in children’s development through the rollout of best start family hubs, extending free school meals and ensuring the poorest don’t go hungry in the holidays through a new £1 billion crisis support package.”