Lax rules that have let asylum seekers use their taxpayer handouts for gambling are ‘very concerning’, a Cabinet minister has admitted.

The Daily Mail revealed this week that there have been thousands of transactions using pre-paid cards meant to fund basics such as food and clothing.

The Home Office, which initially said the abuse was impossible, yesterday launched an investigation into the scandal.

Business Secretary Jonathan Reynolds confirmed that the use of the Aspen cards for gambling was not allowed.

Asked about the Mail’s revelations, he said: ‘It’s already forbidden. It shouldn’t happen. We’ve seen that story.