More than 100 Labour MPs issue tax demand to Rachel Reeves in bid to fund scrapping two-child benefit cap

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 spending on gambling brings little value to Britain's 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 £3.2billion needed to scrap the two-child limit and benefit cap.

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

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It is understood that Sir Keir Starmer will be informed by cabinet ministers that scrapping the limit is the best way to alleviate child poverty.

Reports suggest the child poverty taskforce, which was co-founded by DWP minister Liz Kendall, has concluded its assessment into the cap and is recommending it be lifted.

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 addressing the causes of child poverty.

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

Ms Reeves said on Thursday: “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”.

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 £500million 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 £1billion crisis support package.”