Is a gambling tax the answer to scrap two-child benefit cap?

The Herald Scotland

14 hours ago

'I grew up in a town more than fifty years ago where I saw poverty first-hand. It was a mining town, it was a linoleum town but jobs were being lost and poverty was there. I never thought I would see that kind of poverty again but I am seeing it again.'
The former chancellor pointed to Delaware, where online gambling taxes are far higher than in Britain.
'It would cost three billion to take half a million children out of poverty by scrapping the two-child benefit cap, which would be the quickest way and the most cost-effective way of getting children out of poverty…Three billion could be raised by fair taxation of the gambling industry.
'By taxing the gambling industry, this would be the first step in raising money without breaking the fiscal rules or any manifesto commitment.'
According to reports, the reforms currently being considered by the Chancellor would not impact physical bookies or any bets made in-person except promotional 'free' bets.
Some prominent voices have been more sceptical, however. The former SNP MP for Inverclyde, Ronnie Cowan, has long campaigned on the dangers of gambling. He took to social media to criticise the ex-PM: 'Brown and Blair turned the gambling industry into the Wild West by allowing it to self govern.
'Brown wanted super casinos. He doesn't understand the damage that can be caused by gambling and using them as a cash cow for any government is immoral…Bigger profits [equal] more damage.'
In an open letter, The Herald wrote the cap "punishes children for circumstances entirely beyond their control and entrenches hardship across generations".
It adds: "We believe the removal of the two-child limit would be one of the single most effective measures your government could take to reduce child poverty swiftly and significantly."
The campaign also urged First Minister John Swinney to increase the Scottish Child Payment to £40 per week, per child.
The Scottish Government does not currently hold powers to raise taxes on gambling. However, speaking to the BBC on Thursday about Gordon Brown's proposal, First Minister John Swinney said: 'I think there's merit in that idea because as we all know gambling can lead to significant negative effects in our society which can exacerbate poverty.
(Image: PA Media) 'So therefore there is a reasonable and legitimate argument to raise revenue from such an approach as long as it's reinvested properly.'
Researchers believe the abolition of the two-child cap is one of the clearest paths to reducing child poverty.
The Institute for Public Policy Research (IPPR) said: 'There is consensus across the policy community that investment in removing the two-child limit is the most cost-effective way to reduce the headline rate of poverty.'
The institute is also backing the proposal to raise taxes on gambling, arguing for 'targeted tax rises on profitable parts of the gambling industry – especially online casinos, slot machines, and high-stakes betting – where harms are concentrated and revenues have soared.'
However, the Tax Policy Associates think tank recently released a report claiming that: 'The IPPR's calculation is 'static' – it simply multiplies current gambling profits by the new rates. The IPPR justifies this with illustrative calculations showing gambling companies worsening their odds to maintain their profits.
'If the IPPR are wrong, and the tax can't be passed on, then the revenues raised would be much less than £3bn – potentially half.'
If the two-child cap were to be scrapped, it would also certainly save the Scottish Government money. The Scottish Fiscal Commission forecasts that mitigating the cap is set to cost the Scottish Government £11 million in 2025/6 and up to £155 million in 2026/7.
If Westminster scrapped the cap, this would free up money for the Scottish Government, who are currently facing a £5 billion black hole in their finances.