In a petition backed by over 100 Labor MPs, Rachel Reeves, the United Kingdom’s Chancellor of the Exchequer (effectively the government’s chief financial minister) has been asked to raise taxes on gambling companies. The idea is to use the extra revenue to lift benefit restrictions on families with more than two children.

However, the proposition has also been met with stiff support from both opposition leaders and some government agencies.

Labor MPs Support an Increase in Tax on Gambling Companies

MPs argue that introducing a levy on gambling could generate GBP 3 billion (about $3.9 billion), potentially lifting around half a million children out of poverty. Soon after Labour’s victory in the 2024 general election, the new government came under pressure from its own MPs to scrap the two-child cap, which limits child tax credit and universal credit (UC) payments to a family’s first two children.

At the time, ministers said there was insufficient funding to remove the cap but established a Child Poverty Taskforce to explore other ways to tackle child poverty. The task force had been expected to publish its findings in the spring, but the release has since been delayed.

The Chancellor is confronting a GBP 20 billion ($26 billion) shortfall in meeting her tax and spending targets and may be reluctant to commit the GBP 3.5 billion (about $4.56 billion) that experts estimate would be required to lift the cap. She has already suggested that she may introduce tax increases and spending reductions to create some fiscal headroom.

Criticism Follows the Proposition

Conservative leader Kemi Badenoch has firmly opposed lifting the cap. She argued that taxpayers, many of whom struggle to raise their own children or choose not to have them, should not be expected to fund unlimited child support for others.

Meanwhile, the UK’s Betting and Gaming Council warned that further tax increases on the industry would harm jobs, investment, and crucial funding for sports and tourism. A spokesperson said that each time the Treasury places greater pressure on the regulated market, the black market gains strength. They added that unregulated operators pay no tax, offer no consumer protections, and put UK jobs and revenues at risk.

However, senior figures within the Labour Party have continued to call for change, including Treasury Select Committee chair Dame Meg Hillier. She said that raising taxes on gambling was the only way to lift children out of poverty during the current Parliament.

Some, like the Social Market Foundation think tank, propose a more balanced approach. The organization has argued against merging taxes, instead proposing that higher rates should apply to activities considered more harmful and less beneficial to the British economy, such as online slots. It added that sectors viewed as less harmful and more economically valuable, like traditional horse racing betting, should face lower tax rates.