Gordon Brown has urged ministers to hike taxes on online casinos and slot machines to cover the cost of lifting children out of poverty.

Reforms to gambling taxes could generate the £3.2 billion needed to scrap the two-child limit and benefit cap, the Institute for Public Policy Research (IPPR) said.

The think tank’s latest research said axing the policies could lift half a million children out of poverty and “reverse years of rising hardship for low-income families”.

Giving his backing to the IPPR research, former prime minister Mr Brown said it would be the “first crucial step in the war we must wage against child poverty”.

The Government is expected to publish a child poverty strategy in the autumn, and campaign groups have said it must contain a commitment to abandon the two-child limit.

The IPPR said that to cover the costs of scrapping the policy, it feels “fair” to ask the “highly profitable” gambling industry to contribute more.

gambling more fairly would fully fund the first crucial step in the war we must wage against child poverty: ending the two-child limit and lifting the benefit cap.

“There are many reasons why the highly profitable betting and gaming industry should pay a fairer share towards the cost of UK’s unmet needs. Most important is that it would enable half a million children to be lifted out of poverty in this autumn’s budget, and so help to build our country for the next generation.”

The ex-premier has been taking part in a Government consultation on child poverty, as ministers prepare to bring forward plans to tackle it this autumn.

The IPPR suggested increasing taxes on online casinos from 21% to 50% and raising those on slots and gaming machines from 20% to 50%.

The organisation also proposed raising general betting duty on non-racing bets from 15% to 25% 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.

Henry Parkes, principal economist and head of quantitative research at IPPR, said: “The gambling industry is highly profitable, yet is exempt from paying VAT and often pays no corporation tax, with many online firms based offshore. It is also inescapable that gambling causes serious harm, especially in its most high-stakes forms.

“Set against a context of stark and rising levels of child poverty, it only feels fair to ask this industry to contribute a little more.”