Big livestock farmers suffer in £2bn subsidy shake-up

English farmers are to have their various EU subsidies rolled up into a single payment based on the area that they farm, rather than on what they produce, the Government announced yesterday.

The change, which will be brought in over eight years, is intended to break the link between subsidy and overproduction, which has long been the major criticism of the common agricultural policy (CAP).

In future, England's 75,000 farmers will still be paid their £2bn EU kitty, but it will not be based on how much milk or beef they produce or how much wheat or barley they grow.

It will be the same per-hectare rate for all of them, large or small, based on the size of their farms - and to claim it, they will have to comply with a series of rules intended to keep the countryside in an environmentally healthy state.

CAP subsidies based directly on how much a farmer could produce led in the past to huge and wasteful surpluses - such as the so-called butter mountain and wine lake - which were not only economically wasteful and distorted international trade, but resulted in a system of intensive agriculture gravely harmful to countryside wildlife. Britain, for example, has seen some of its farmland bird populations drop by more than 90 per cent in the three decades.

EU farming ministers, including Margaret Beckett, agreed last June after marathon talks to "decouple" subsidy from production, in what was seen as the biggest change to CAP in a generation.

Yesterday Mrs Beckett announced how the new subsidy regime would be applied in England, saying it was "a decisive and irreversible shift which offers huge opportunities to the industry".

She rejected calls from some farmers for it to be based on the subsidies they received in the past, in favour of the flat-rate area payment system.

But because some farmers will be losers under the new regime - such as intensive livestock farmers, who have a lot of animals on not a lot of land, and will be paid much less by the hectare than they were by head of cattle - it is to be phased in over eight years from 2005. By then most English farmers will receive an annual subsidy of about £220 per hectare no matter what they produce (although hill farmers, with very large tracts of grazing land, will probably receive about £70).

Some farmers will be gainers - particularly those such as vegetable growers whose produce was not previously subsidised.

The system will free farmers to produce what the market wants, rather than being led by the nose by subsidy, and the new flexibility is welcomed by many of them.

But some people believe the greatest advantage of "decoupling" is the environmental benefits it may bring to the countryside.

Farmers will be subject to "cross-compliance" to claim their payments - meaning they will have to adhere strictly to environmental and animal welfare legislation, or their payments can be withheld. The full details have yet to be worked out - especially of a rule that specifies that land will have to be kept in "good agricultural and environmental condition" - and much will depend on how tough they are.

"This is a fantastic signal in the right direction," said Sue Armstrong-Brown, head of agricultural policy at the Royal Society for the Protection of Birds. "The big challenge is to make it meaningful for the environment.

"We're still going to have £2bn worth of taxpayers' money being spent every year, and we're moving towards a more rational way of distributing it, and that's great. But for it to mean something, cross-compliance will have to have teeth."

WINNERS AND LOSERS

Arable farmer

Roger Welberry runs one of the biggest family-owned vegetable farms in Lincolnshire, producing thousands of tons of cabbages, sprouts and broccoli - which, unlike livestock or cereal crops, have never attracted a penny in EU subsidy. But as the EU funding gradually moves over to flat-rate area payments for everyone, annual subsidy cheques will start to pop through the letterbox of Holme Farm at Kirton Holme, near Boston.

The 600 hectares he directly owns or rents will, he thinks, initially attract about £21 per hectare, an annual total of £12,600; between now and 2012, when area payments will have become the norm, the total will rise to ten times that figure. Mr Welberry, 60, whose family has run the farm for four generations, welcomes the new income although he says it will not make a great deal of difference to a business with an annual turnover of about £12m. In fact, he says, most of it will probably be spent on the environmental improvements that will eventually be necessary to qualify for the payment.

"We've never had subsidy, we've never expected it, and we've managed to survive and do reasonably well without it," he said. "I do think decoupling subsidy from production is a good thing. We've been overproducing."

Mixed farmer

Anthony Rew, who runs a traditional mixed farm near Newton Abbott in Devon, says big livestock farmers will be the losers under the new scheme. But Mr Rew, with a moderate number of livestock, thinks he too will be a loser - albeit on a small scale - or just about break even. His 140 hectares of winter wheat, barley and beef and dairy cattle (230 animals in all) at present attract three separate EU subsidies, but by 2012, under the new scheme, he will be receiving a single annual area payment of about £30,800, which is not very different from what he receives now.

However, some intensive livestock farmers he knows with larger numbers of animals will be down when they are paid by the hectare and not by the head of cattle.

Mr Rew, 44, believes the new scheme offers farmers the flexibility to produce what the market wants. "For too long we've been marshalled by the subsidy regime," he said. "Farmers are looking for a change, although we must have a fair share of the supermarket price.

"If you have an intensive beef unit, this could be bad for you in the long term, but the fact that it is being brought in over eight years means farmers will be able to plan for the future and adjust to it. "