Brexit 'will blow hole in budget', EU commissioner warns

The UK will be taking money from the budget, the EU is warning - at the same time that the bloc will have new outgoings

The UK's departure from the EU will leave a budget shortfall of at least €10bn (£8.8bn; $11.4bn), the budget commissioner has warned.

Günther Oettinger said the bloc must either spend less or find new money to fill the gap, equivalent to an estimated 16% of the entire budget.

Among the options on the table could be less generous payments to farmers or a tax on financial transactions.

"A big country, a net contributor is leaving," Mr Oettinger said.

"That must have consequences."

Mr Oettinger said each euro spent must have a positive impact on people's lives, as he presented a discussion paper on the EU's future.

Negotiations are under way for the UK to leave the EU by the end of March 2019, following last year's referendum vote.

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It is not just Brexit giving the EU a budget headache.

"At the same time we need to finance new tasks such as defence, internal security...," Mr Oettinger writes, with regional policy commissioner Corina Cretu, in an EU blog.

"The total gap could therefore be up to twice as much."

The BBC's Europe reporter, Adam Fleming, says the disappearance of Britain's annual rebate will make the budget process simpler.

The rebate, negotiated under former Prime Minister Margaret Thatcher, is a complex calculation which sees a sizeable proportion of the UK's net contribution to the EU each year returned.

Officials will now consult member states and the European Parliament, our reporter says,

They hope the "Brexit effect" will be clearer by the end of the year and a draft budget for the years 2020 and beyond will be proposed by the middle of next year.