Labour MPs have told the UK Government it must tax the gambling industry if it is serious about tackling child poverty, messaging that will be unsettling to UK operators battling against increasing uncertainty.
A group of 101 Labour MPs have signed a letter urging Chancellor Rachel Reeves to take a “polluter pays” approach to taxing online gaming as she weighs scrapping the two-child benefit cap.
These calls echo rising sentiment that suggest a spiked levy would raise billions of pounds and tackle a growing issue, which, according to the Joseph Rowntree Foundation’s UK Poverty 2025 report, sees almost one in three children in the UK living in poverty.
The letter was penned by MP’s Alex Ballinger and Dr Beccy Cooper, both members of the Gambling Reform All Party Parliamentary Group, who argue for a “targeted levy on online gambling products”, the revenue for which should be ringfenced to address child poverty and related harms.
Growing pressure on Labour
Prime Minister Keir Starmer is facing increasing pressure to scrap the two-child benefit cap, which campaigners argue would be the most effective way to address the issue of child poverty. Currently, child tax credit and universal credit is limited to the first two children born in a family.
However, it is estimated that this would cost the already cash-strapped government an extra £3bn, which is where online gambling comes into play.
The Institute for Public Policy Research, whose proposal has been backed by former UK PM Gordon Brown, has called for a 50% tax on online and retail slots, rising from 21% and 25% respectively, which is estimated could raise an additional £1.88bn alone.
Earlier this week, the Liberal Democrats also proposed hiking remote gaming duty from 21% to 42% as part of its latest policy for the industry – arguing that online gambling companies must “pay their fair share”.
The letter delivered to the Chancellor by Labour MPs, which does not specify a specific tax rate change, argues that online gaming in the UK faces a lighter financial burden compared to comparative markets such as the Netherlands and Austria, where online casinos are currently taxed at 34.2% and 40% respectively.
Although citing the Netherlands as an example to follow, it should be noted that since the Dutch Government increased tax on GGR to 34.2% at the start of 2025, tax revenue has declined from both the online and land-based sector.
The letter also accuses online gambling operators of avoiding VAT as well as basing themselves offshore, reducing tax contributions on domestic profits and contributing “relatively little to UK employment.
However, the Betting and Gaming Council, which has repeatedly rallied against calls for a tax hike, arguing it will push players towards the black market, says its members generate £4bn in tax and support 109,000 jobs.
“No child should grow up in poverty while gambling companies make record profits. Gambling harms are increasing, yet gambling is VAT exempt,” said Ballinger, as he shared the letter on social media.
Ballinger has previously supported the recommendations of the Social Market Foundation, which has also advocated for tax on online slots to better reflect the growing popularity of the sector.
In a report produced by the SMF, he stated: “The evidence is clear: some gambling products – like online slots – cause far more harm than others. These harms carry huge costs, from personal debt and family breakdown to rising pressure on public services. Our tax system should reflect this. It is not right that more harmful, low-employment sectors pay less tax than less harmful ones that bring greater social and economic value, like horse racing.”
Scrapping the two-child benefit cap may well be seen as an easy win for Starmer who is currently facing mounting pressure over his position as leader of the government.
Andy Burnham, Mayor of Greater Manchester, has told the Daily Telegraph that Labour MPs have called on him to challenge Starmer as they question the government’s performance amid the rise of Reform UK in national opinion polls against Labour dwindling popularity.
Whilst logistically, it is a long way off happening – this alternative would lead to increased trepidation for the gambling industry, with the Manchester Mayor a vocal opposition voice to the gambling sector – having lended his voice to calls for greater controls over high-street gambling venues..
Therefore, taking direct action on an emotive issue like child poverty while targeting a sector that the general public view as highly profitable, and in some cases harmful, would be a straightforward way for Starmer to improve his standing.
All eyes on Liverpool
Attention will now turn to the Labour Party Conference in Liverpool (28-to-1 October), as speculation mounts that PM Starmer will declare the end of the two-child benefit cap as the headline grabbing announcement to bring the event to a close.
The measure has been long targeted by Starmer to lift the cap impacting 450,000 households receiving Universal income benefits (according to Child Action Poverty Group).
The Chancellor’s principal budget advisor is Torsten Bell, who is reported to be shaping year-2 of Labour’s fiscal plan to tackle the key areas of pension reform, tax alignment on secondary income and to develop new tax relief schemes for small/SME business to improve productivity.
In her first Budget, Reeves prioritised “balancing the books” after uncovering a £25bn black hole left unreported by the Conservative government. At the time, there was speculation that she would introduce significant tax increases on gambling – a measure that ultimately did not materialise, though the Chancellor confirmed it would be kept under review during Labour’s tenure.
Starmer has never made a direct statement on the taxation of UK gambling. However, in September 2025 he referenced gambling policy more broadly, signalling plans to give local councils stronger powers to control the number and location of betting shops. This included the potential introduction of cumulative impact assessments as part of his government’s wider “Pride in Place” agenda to revitalise high streets.
As such, the Autumn Conference could all but seal the deal on higher gambling taxes, with November’s Budget set to nail down the Treasury’s exact percentage. Reeves has already confirmed the IPPR’s proposals are “on the table, so for industry chiefs the upcoming budget will finally close a chapter of prolonged uncertainty, though few expect the settlement to come cheap.
