Rachel Reeves faces mounting pressure from her own party to fund the abolition of the two-child benefit cap through higher taxes on gambling companies. More than 100 Labour MPs have written to the Chancellor ahead of the autumn Budget, demanding action on a policy long blamed for keeping children in poverty.
The parliamentarians propose a "targeted levy on harmful online gambling products" to cover the estimated £3.2 billion cost of scrapping the controversial limit. They argue this approach would simultaneously support the government's manifesto pledge to reduce gambling-related harm whilst enabling vital action to alleviate child poverty.
Gambling tax proposal
The MPs highlighted that the UK's effective tax rate on remote gambling remains significantly lower than many comparable jurisdictions. Betting companies continue to generate substantial profits whilst employing relatively few people and often basing operations offshore to reduce their tax obligations.
The Institute for Public Policy Research, backed by former prime minister Gordon Brown, has outlined specific reforms that could generate the necessary funding. The think tank suggests increasing taxes on online casinos from 21% to 50% and raising levies on slots and gaming machines from 20% to 50%.
Consumer spending on gambling brings little value to the broader UK economy, the MPs argued in their letter. They emphasised that current taxation arrangements fail to reflect the societal costs associated with gambling-related harm.
Taskforce recommendation
The Times reported that the child poverty taskforce, established by Sir Keir Starmer (Labour), will recommend lifting the two-child cap. The recommendations are expected before the Budget, although the report has previously faced delays, with lifting the cap said to be its top recommendation.
Alex Ballinger, who signed the letter and serves on 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."
Political momentum building
The two-child benefit cap remains a contentious issue within Labour ranks, more than a year after the party took office. The policy will likely feature prominently at the party conference beginning 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. Education Secretary Phillipson's recent description of the cap as "spiteful" and her assertion that scrapping it is "on the table" signals growing ministerial consideration of the move.
Reeves herself acknowledged on Monday that changes are "on the table". Speaking to ITV before receiving the MPs' letter, 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."
The Conservative government introduced the two-child benefit cap in 2015, restricting child tax credit and universal credit to the first two children in most households. Mainstream, the Labour campaign group backed by mayor of Greater Manchester Andy Burnham, has also supported scrapping the policy.
Sources used: "PA Media", "The Times" Note: This article has been edited with the help of Artificial Intelligence.
