UK bank shares tumbled on Friday, cutting the stock market value of the sector by almost £8bn in morning trading, as fresh calls for a windfall tax on large lenders in the autumn budget spooked investors.

Calls for a tax grab, in a paper written by the Institute for Public Policy Research (IPPR) thinktank, took a toll on some of the UK’s biggest high street banks. NatWest Group suffered the biggest drop on Friday morning, registering a decline of as much as 5% in its share price, while Lloyds Banking Group and Barclays followed close behind, falling 4.5% and 3.6% respectively. HSBC dropped more than 1%.

The falls cut the notional value of the UK’s biggest banks by £7.9bn within hours of the market opening.

It comes as rumours swirl over a number of potential tax increases – including on banks, property and landlords’ rental income – which could help the chancellor, Rachel Reeves, plug a shortfall of up to £40bn in the public finances.

The IPPR’s report calls for a new tax on the big banks that would help to recover “windfalls” enjoyed by lenders as a result of an emergency economic policy known as quantitative easing, which was put in place in the wake of the 2008 financial crisis.

Confidence among UK businesses has grown despite anxiety about the state of the economy, in a rare slice of positive news for the chancellor, Rachel Reeves, in the run-up to her autumn budget.

An August poll of UK companies by Lloyds Bank showed that improved sentiment among manufacturers and retailers helped push overall optimism within UK plc up by two percentage points, with 54% of companies now feeling confident in the current environment.

It marked the fourth consecutive monthly increase in overall business sentiment, according to the Lloyds business barometer, driven by a growing number of businesses – roughly 63% – feeling strong about their own trading prospects. On that measurement alone, confidence reached its highest level since 2014.

About half of all businesses now expect to hire more staff in the coming year despite growing costs. The survey found 38% of companies are expecting to have to raise wages by 3% or more, with the vast majority – 83% – saying that higher employment-related costs would have a limited impact on hiring plans.

Overall optimism across the private sector comes despite jitters over the state of the economy, with levels of positive sentiment falling for the first time since the drop seen in April, when Donald Trump’s sweeping tariff announcements sparked fears over the future of global trade. Economic confidence fell three points to 44% this month, Lloyds said, although that remained above the longer-term average of 19%.

However, the fact that business confidence continues to rise amid the economic gloom will be a rare piece of good news for the chancellor, given fears that a fresh round of tax increases – meant to bolster the public finances – could knock confidence and investment across the private sector as companies try to recoup and offset costs. Reeves is expected to announce a date for her autumn budget within days.

Scottish Greens have elected a new co-leadership team, with MSPs Gillian Mackay and Ross Greer voted in to take the party forward.

The pair replace Patrick Harvie and Lorna Slater, both of whom had served as junior ministers in the Scottish government under a powersharing deal with the SNP.

Harvie announced earlier this year he was standing down from his co-leadership post. Slater had stood for re-election, but was defeated in the leadership contest, which is held every two years under Scottish Green party rules.

The UK government has banned Israeli officials from attending the country’s flagship defence event next month.

Israeli industry, including UK subsidiaries of Israeli companies will be able to attend London’s Defence & Security Equipment International (DSEI) show in September but the UK government will not invite representatives of the Israeli government to the major industry event.

The move comes as Keir Starmer prepares to recognise a Palestinian state after warning Israel it would do so if the country did not take steps to relieve suffering in Gaza and met other conditions.

A UK government spokesperson said:

The Israeli government’s decision to further escalate its military operation in Gaza is wrong. As a result, we can confirm that no Israeli government delegation will be invited to attend DSEI UK 2025.

There must be a diplomatic solution to end this war now, with an immediate ceasefire, the return of the hostages and a surge in humanitarian aid to the people of Gaza.

Israel’s defence ministry said that as a result of the trade fair ban it would not run its national pavilion as it has done previously at the DSEI.

Israeli defence companies, such as Elbit Systems, Rafael, IAI and Uvision, will be able to attend.

Conspiracy theorists who spread misinformation must be defeated, a health minister said, as he urged parents to take up the new chickenpox jab.

The government has announced a new vaccination programme for chickenpox from January, meaning that GPs will offer eligible children a combined vaccine for measles, mumps, rubella and varicella – the clinical term for chickenpox – as part of the routine infant vaccination schedule.

Health minister Stephen Kinnock argued it is “common sense” for parents to vaccinate their children, amid what he described as a rise in “vaccine hesitancy” after the Covid pandemic.

Speaking to LBC, Kinnock said:

There’s been a 10-year trend in declining take-up of vaccines, and I think obviously the vaccine hesitancy that came after the pandemic has definitely not helped.

These conspiracy theorists, who are peddling this nonsense and rubbish, we’ve got to take them on, we’ve got to defeat them in our arguments and drown out the noise that they’re making.

The government is working with GPs, schools and public health authorities to create local and national campaigns in an attempt to increase take-up, Kinnock said.

Dr Gayatri Amirthalingam, deputy director of immunisation at the UKHSA, said:

Most parents probably consider chickenpox to be a common and mild illness, but for some babies, young children and even adults, chickenpox can be very serious, leading to hospital admission and tragically, while rare, it can be fatal.

It is excellent news, that from next January, we will be introducing a vaccine to protect against chickenpox into the NHS routine childhood vaccination programme – helping prevent what is for most a nasty illness and for those who develop severe symptoms, it could be a life saver.

According to the Department of Health and Social Care, chickenpox causes an estimated £24m in lost income and productivity every year in the UK, with parents forced to take time off work to care for their children. The rollout of the vaccine is also expected to save the NHS £15m a year in costs for treating the illness.

Kinnock said:

We’re giving parents the power to protect their children from chickenpox and its serious complications, while keeping them in nursery or the classroom where they belong and preventing parents from scrambling for childcare or having to miss work.

This vaccine puts children’s health first and gives working families the support they deserve.

The Joint Committee on Vaccination and Immunisation, which advises UK health departments, recommended the introduction of the jab on the NHS in November 2023.

Amanda Doyle, national director for primary care and community services at NHS England, said:

This is a hugely positive moment for families as the NHS gets ready to roll out a vaccine to protect children against chickenpox for the first time, adding to the arsenal of other routine jabs that safeguard against serious illness.

We will work with vaccination teams and GP surgeries across the country to roll out the combined MMRV vaccine in the new year, helping to keep children healthy and prevent sickness from these highly contagious viruses.

Rachel Reeves should levy a new bank tax and urge the Bank of England to halt bond sales to reduce the government’s £22bn-a-year losses from quantitative easing, the IPPR thinktank has argued.

In a report called Fixing the Leak, the IPPR’s associate director for economic policy, Carsten Jung, says the Treasury should rein in the costs of QE as public finances are tight.

“What started as a programme to boost the economy is now a massive drain on taxpayer money,” he said. “Public money is flowing straight into commercial banks’ coffers because of a flawed policy design. While families struggle with rising costs, the government is … [in effect] writing multibillion-pound cheques to bank shareholders.”

The emergency policy, first enacted in 2009 during the global financial crisis, involved buying up £895bn of bonds from the UK’s banks and, in exchange, crediting them with reserves at the Bank of England.

The Bank is now winding down QE – a process known as “quantitative tightening” (QT) – by selling the bonds at a rate of £100bn a year, but these sales are taking place at a loss.

In accordance with a promise from Alistair Darling, then chancellor, the Treasury bears the financial risks of QE, so these losses hit the government’s finances.

In addition, the higher Bank of England base rate, now set at 4% to combat above-target inflation, means the Bank is paying out higher interest rates on banks’ reserves than it is receiving on the bonds it holds. In total, these losses amount to a £22bn-a-year hit to the public finances, according to the IPPR.

Jung calls for the Treasury to tax the big banks on their QE-related reserves, saying the profits of the big four have more than doubled since before the Covid pandemic.

He says such a policy could bring in £8bn a year and sidestep the Bank’s objections to a widely mooted alternative known as “tiered reserves”, which the Bank’s governor, Andrew Bailey, has argued could interfere with its job of combating inflation.

The immediate closure of asylum hotels could lead to migrants “living destitute in the streets”, a government minister said, as he warned against a “disorderly discharge”.

Health minister Stephen Kinnock told Sky News:

It’s not a question of if we close the hotels, it’s a question of when and how we close the hotels, and what we don’t want to have is a disorderly discharge from every hotel in the country, which would actually have far worse consequences than what we currently have, in terms of the impact that would have on asylum seekers potentially living destitute in the streets.

And I don’t think any one of the communities that are campaigning on these hotels issue want to see that.

So what we are doing is looking to appeal this injunction simply because we’re taking a pragmatic approach to how we want to manage the process, not because we believe that the hotel … per se should stay open.”

Pressed on where the migrants would be moved to if the Bell hotel in Epping were to close, Kinnock said:

We’ve got a whole range of options – disused warehouses, disused office blocks, disused military barracks.

We are looking at every option that we have to manage the discharge, and it’s really important that we do that and put those plans in place, but of course, it’s going to be much more effective if we’re able to do that in a way where we’re controlling the discharge from these hotels.

Later today, we should get the judgment from the three senior judges ruling on whether to overturn a temporary injunction which is to block asylum seekers from being housed at the Bell hotel. It is expected at about 2pm.

In other developments:

• The Foreign Office in London summoned Russia’s ambassador to the UK, Andrey Kelin, at 1pm, in direct response to the severe damage inflicted on the British Council building in Ukraine, government sources said. The prime minister, Keir Starmer, condemned the attacks as “senseless” and accused Russia of “sabotaging hopes of peace”.

• Rachel Reeves should levy a new bank tax and urge the Bank of England to halt bond sales to reduce the government’s £22bn-a-year losses from quantitative easing, the IPPR thinktank has argued. In a report called Fixing the Leak, the IPPR’s associate director for economic policy, Carsten Jung, says the Treasury should rein in the costs of QE as public finances are tight.

• England needs to “wake up” to its faltering infant vaccination programme, experts have warned, as it was revealed that one in five children start primary school unprotected from serious infectious diseases. The government has urged parents to make sure their children are up to date with their vaccines.

• The Reform party’s promise to abolish policies on equality and diversity is “ludicrous” and threatens to take policing and society backwards, one of the country’s most senior chief constables has said. Serena Kennedy retires on Sunday as the chief constable of Merseyside police, after a tumultuous four years in charge. She criticised politicians including the Reform UK leader, Nigel Farage, for making questionable statements at times of heightened tension, such as immediately after last summer’s Southport riot.

• A member of the House of Lords asked a senior British diplomat to help a Ghanaian goldmining venture in which he held shares, claiming it was “in the UK national interest”, the Guardian can disclose. The revelation will add to concerns about apparent breaches of parliamentary lobbying rules by Richard Dannatt, a former head of the British army. The peer is already under scrutiny over his lobbying for several companies, leading in two cases to investigations by the Lords’ standards body.