Gambling firms face tax hike as Reeves under pressure to end two-child benefits cap

The Chancellor is considering hiking taxes on the gambling industry in the Budget to raise money, as she came under pressure over rising levels of child poverty.

It is understood Rachel Reeves is looking at how levies on the multibillion-pound industry could be toughened up in order to generate revenue for the government, having launched a review of taxes in the sector earlier this year.

Former Prime Minister Gordon Brown suggested the money raised by increasing the tax could be used to scrap the two-child benefit limit, improving the incomes of poorer families.

The Government has not ruled out lifting the benefit limit, but sources would not be drawn on whether the gambling taxes could pay for it.

Reeves said she was “concerned” about child poverty levels, which are continuing to rise under this Labour Government, and would set out policies to address the challenge once she had received recommendations from a dedicated committee.

“Like Gordon, I am deeply concerned about the levels of child poverty in Britain. No child should grow up hungry or parents not be able to afford the basics for their family,” Reeves told broadcasters on Thursday.

“We’re a Labour Government. Of course, we care about child poverty. That’s why one of the first things we did as a government was to set up a child poverty task force that will be reporting in the autumn and (will) respond to it then.”

The child poverty task force is due to report in autumn, which would coincide with the timing of the next Budget.

This offers the chance for the government to announce policies that require public spending – such as lifting the cap, which prevents families from claiming benefits for more than two children – alongside the Budget.

Gordon Brown’s plan

The issue of the two-child cap has dogged the government since it entered office last July. Keir Starmer suspended seven rebel MPs who voted for an SNP amendment to scrap the cap in the first rebellions Labour faced last year, just weeks after the election.

Brown, the former Labour chancellor and PM, had suggested increasing duties for online casinos and slot machines to fund welfare reform.

Asked whether she was considering the suggestion, Reeves said she had spoken to him last week and would set out the Government’s policy in the Autumn Budget.

“We have already launched a review into gambling taxes. We’re taking evidence on that at the moment, and again, we’ll set out our policies in the normal way, in our budget later this year,” she said.

The Treasury is looking at introducing a streamlined tax to reflect the growth in online betting – proposing a new single levy that would apply to all online betting and gaming.

A consultation on the topic closed last month and the Government is due to respond later in the year.

But the Institute for Public Policy Research think tank is among organisations lobbying for tougher taxes on the industry and reform of how they are applied.

It suggested increasing taxes on online casinos from 21 per cent to 50 per cent, on slots and gaming machines from 20 per cent to 50 per cent and hiking the general betting duty from 15 to 25 per cent.

This would, a report said, raise around £3bn to fund the lifting of the cap, which contributes to around half a million children living in poverty.

The Betting and Gaming Council has criticised the proposal and said it would encourage the growth of an “unregulated gambling black market”.

A spokesperson said: “Further tax rises, fresh off the back of Government reforms which cost the sector over a billion in lost revenue, would do more harm than good, for punters, jobs, growth and public finances.”

Economists have said that Reeves will have little choice but to raise taxes in October’s budget in order to plug an estimated £41.2bn gap in her finances. But on Wednesday, Prime Minister Keir Starmer said the budget would be focused on raising living standards as voters struggle with a flat-lining economy and high food and energy prices.