Shares in the UK’s largest lenders fell sharply on Friday after an influential think tank urged Chancellor of the Exchequer Rachel Reeves to tax the interest banks earn on reserves held at the Bank of England. NatWest dropped about 5 percent, while Lloyds Banking Group and Barclays slipped 3.8 percent and 3.6 percent respectively, as investors priced in the risk that the sector could face a fresh levy in the autumn Budget. In a report released the same day, the Institute for Public Policy Research said a targeted levy on the profits banks make from BoE reserves could raise £8 billion a year, or £32.3 billion over the current five-year parliament. The group argued the measure would help fill an estimated £20 billion hole in the public finances and offset what it called a £22 billion annual “subsidy” to lenders created by quantitative-easing reserves now earning higher interest rates. The proposal revives memories of Margaret Thatcher’s 1981 surcharge on banks and comes amid wider scrutiny of Reeves’s options after last year’s £40 billion package of tax increases. Treasury officials said boosting economic growth remains the Government’s preferred way to repair the public finances, but they did not rule out further tax measures ahead of the Budget.