Labour should consider raising taxes on gambling firms to cover the cost of lifting the two-child benefit cap, the party’s deputy leadership candidate Lucy Powell has suggested.
The Manchester Central MP, who is battling with the education secretary, Bridget Phillipson, to succeed Angela Rayner as Labour’s deputy leader, also acknowledged the public was “exasperated” because of “some mistakes” Labour had made in office.
Powell said the party had to “give a greater sense of who we’re fighting for” including by being “clear that our objective is to lift children out of poverty” by axing the two-child benefit limit.
On Friday Phillipson told the Guardian that abolishing the “spiteful” cap was “on the table” and the policy had “punished and pushed children into hardship”, the clearest sign yet that Downing Street is preparing to scrap the controversial measure.
The education secretary vowed, if she won the deputy leadership contest, she would have a mandate to make tackling child poverty the “unbreakable moral mission” of this government.
Writing in the Mirror, Powell said: “I want us to be clear that our objective is to lift children out of poverty and that will mean we need to lift the cap. Gordon Brown has set out ways of raising money from gambling firms which should get careful consideration.”
The policy was announced in 2015 by the Conservative government and restricts child tax credit and universal credit to the first two children in most households.
Brown recently backed a report from the Institute for Public Policy Research, which said reforms to gambling levies could generate the £3.2bn needed to scrap the two-child limit and benefit cap.
The thinktank’s research said scrapping the policies could lift 500,000 children out of poverty.
Powell, who was sacked as Commons leader in Keir Starmer’s recent reshuffle, sought to differentiate herself from Phillipson, who is regarded as Downing Street’s choice for the deputy leader position.
“I’m not afraid to have difficult conversations when we need to change course,” she wrote, adding: “I would be a strong independent choice for deputy leader.
“I couldn’t have been prouder of getting a Labour government last year. But I know that people have been exasperated because of some mistakes we’ve made, and delivering change can sometimes be slow.”
Powell said “despite our early achievements, this Labour story hasn’t been heard loud enough”, and “we’ve got to give a greater sense of who we’re fighting for”.
The prime minister has not committed to axing the limit, but he has consistently declined to rule it out.
Meanwhile Phillipson is reportedly looking at plans to abolish a subsidy that means two-thirds of Ofsted inspection costs are effectively discounted for private schools.
The cost of providing Ofsted inspections to private schools in 2024-25 was £6.5m, according to figures set out by then education minister Stephen Morgan earlier this month. But only £2.2m of that was recovered by Ofsted.
Allies of Phillipson told the Telegraph: “Inspection is crucially important for driving up standards in all schools as well as keeping children safe … but it’s time every independent school paid its fair share.
“It’s frankly unfair. Taxpayers, most of whom send their children to state schools, shouldn’t have to foot the bill to make sure they’re accountable to fee-paying parents.”
Powell’s intervention comes as Rachel Reeves was urged to cancel plans to be the guest of honour at an event hosted by the chief lobbyist of the gambling industry while the Treasury is in the midst of a review of taxes on the £12bn sector.
The chancellor was due to appear at a “private reception” for business leaders, organised by the corporate communications company Brunswick, at next week’s Labour party conference in Liverpool.
