Britain has not seen poverty this bad for more than half a century, Gordon Brown has warned as he urged Sir Keir Starmer to scrap the two-child benefit cap at the next Budget.
The former Labour prime minister and chancellor – who said “we are dealing with a divided Britain” and described it as a “social crisis” – backed the introduction of reforms to gambling taxes in order to generate the £3.2bn needed to scrap the cap.
Mr Brown said the gambling industry is “undertaxed”, throwing his weight behind a report from the Institute for Public Policy Research (IPPR), which said that around half a million children could be lifted out of poverty through the reforms.
The two-child benefit cap, which was introduced by Conservative chancellor George Osborne, prevents parents from claiming benefits for a third or subsequent child born after April 2017.
Speaking on BBC Radio 4’s Today programme, the former prime minister issued a stark warning about the state of Britain after 14 years of austerity under the Conservatives, urging the current government to take action.
“Look, we’re dealing with a divided Britain. We’re dealing with a social crisis,” he said. “This problem is getting worse. It’s going to worsen over the next few years, because there’s a built-in escalator in the poverty figures because of the two-child rule.”
He added: “I live in the constituency in which I grew up. I still live here. I see every day this situation getting worse, and I did not think I would see the kind of poverty I saw when I was growing up, when we had slum housing, when we had travelling people coming to my school.
“This is a return to the kind of poverty of 60 years ago, and I think we’ve got to act now, and that’s why it’s urgent that we take action in this Budget.”
Speaking to ITV, he added: “You cannot have a situation where, under a Labour government, child poverty numbers just go up, and up, and up.”
Rachel Reeves left the door open to a hike in gambling tax following Mr Brown’s comments, saying she had spoken with the former prime minister last week and that she is “deeply concerned around the levels of child poverty in Britain”.
Asked whether she was considering his proposals, the chancellor said on a visit to Dyffryn, in south Wales: “No child should grow up hungry, or parents not be able to afford the basics for their family.
“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 taskforce that will be reporting in the autumn, and [we will] respond to it then.”
She added: “We’ve 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.”
Sir Keir Starmer is thought to be personally in favour of scrapping the cap, but after a number of expensive U-turns and a new report from top economists warning that the chancellor is facing a £51bn black hole in the public finances, there are growing questions over how the prime minister would be able to fund such a move.
MPs from across Labour have repeatedly urged the prime minister to scrap or ease the limit as concern grows over the direction of the party. Critics of the policy say removing it would be the most effective way of reducing child poverty, amid warnings that as many as 100 children are pulled into poverty every day because of the cap.
Kate Osborne, the Labour MP for Jarrow and Gateshead East, backed Mr Brown’s intervention, saying she “completely agrees” with the former prime minister and urging the government to scrap the two-child benefit cap “as soon as possible”.
“Tackling child poverty should be our No 1 priority. Child poverty scars people for life,” she said. “The North East has the highest levels of child poverty; it has reached nearly 40 per cent in my constituency.
“Scrapping the cap would take 500,000 kids out of poverty immediately. It should be done as soon as possible, and should be paid for by taxing the richest in society and those that make a profit out of other people’s pain and addiction.”
York Central MP Rachael Maskell, who was suspended from Labour after leading a rebellion against the government’s controversial welfare reforms earlier this year, urged Sir Keir to go even further than scrapping the two-child limit.
“It is vital that the right fiscal interventions are seen as a priority, and hypothecating a gambling tax is a positive start to lift the first 360,000 children out of poverty through scrapping the two-child limit,” she said. “However, scrapping the cap will not be enough. Families need stability and support, wages need to pay the bills, and children need environments in which they can thrive.”
Ms Maskell added: “The contribution that the former prime minister, Gordon Brown, has made to this debate is significant ahead of the autumn Budget. I trust government will follow the evidence and ensure every child has the best start in life.”
It is thought that a decision on the cap won’t be taken until the government publishes its child poverty strategy, which has now been delayed until the autumn.
Mr Brown said he understands that Reeves has “inherited a very difficult fiscal situation”, but warned: “At the Budget, the government has one straightforward choice. Gambling will not build our country for the next generation, but children free from poverty will.”
His comments came after the IPPR report urged the government to look at changing the way gambling is taxed, which it said could raise £3.2bn. It suggested an increase in tax paid by online casinos, from 21 per cent to 50 per cent, and raising the levy on slot and gaming machines from 20 per cent to 50 per cent.
The organisation also proposed raising general betting duty on non-racing bets from 15 per cent to 25 per cent, which it said would bring other sports in line with the rates paid by horseracing.
The IPPR said raising gambling taxes like this would be unlikely to reduce overall government revenue.
But a spokesperson for the Betting and Gaming Council rejected the “economically reckless, factually misleading” proposals, which it said “risk driving huge numbers to the growing, unsafe, unregulated gambling black market, which doesn’t protect consumers and contributes zero tax”.
They added: “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.”
The Treasury has been contacted for comment.
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