THE shape of things to come for the Common Agricultural Policy has finally been revealed by the Government.

Agriculture Minister Margaret Beckett described the reforms unveiled last week as "a decisive, irreversible and forward-looking shift" in the direction of farm subsidy.

The new system, to come into force in 2005, will fundamentally change the thrust of the EU-wide system of farm subsidy by "decoupling" payments from production. Traditional payments based on food production will be replaced with a Single Farm Payment based on the area of land managed.

When the new system begins next year, ten per cent of the Single Farm Payment will be based on area and 90 per cent will be calculated on the "historic" value of old-style production subsidies paid between 2000 and 2002. The proportion of pure area payments will be phased in on a sliding scale to reach 100 per cent by 2012.

Area payments will be based on two types of land, or regions - Severely Disadvantaged Areas, (typically challenging upland areas usually on hill farms) and all other farm land. The Government cannot yet calculate values until all applications are in but initial figures suggest that SDA will attract payments of between £65 and £85 per hectare and other land around £210.

The apparent disparity in the amounts is accounted for by the fact that farmers in disadvantaged areas are likely to have more hectares and should therefore do proportionally better. Ministers have described the formula as "moving money up hill" although many North West hill farmers are not convinced the money will be coming their way.

The formula will only work for those who have large farms which is not true of all holdings in SDAs. Thier payouts will also get progressively worse as the historic part of the new single farm payment is phased out.

NFU North West members tackled DEFRA Secretary of State Margaret Beckett on this point as they put questions to her at this week's NFU annual meeting.

Thomas Binns, NFU North West regional livestock board chairman, said the system put farmers in the Cumbrian uplands at a "serious disadvantage".

"There is no one solution. It's a very complicated issue that the NFU will begin to work on as a matter of priority."

Across the border in Scotland, and also in Wales, the devolved Governments controlling agriculture have opted to do things differently. Single Farm Payments there will be based entirely on historic payments.

All payments will be linked to farmers complying with environmental welfare standards monitored by the Government.

The Government's chosen way of implementing the EU-wide changes has received a mixed response from the farming community.

NFU president Ben Gill said decoupling would be: "a major breakthrough" which would allow farmers to "become more focused on the market place free from the straight-jacket of production linked subsidies."

The NFU was also pleased that the Government had chosen not to introduce the much-feared National Envelopes which would have taken 10 per cent from all single farm payments to redistribute them as extra payments to preferred forms of agriculture.

The Country Land and Business Association, however, warned of problems ahead.

It said the "hybrid" system of mixed historical and area payments for eight years would penalise efficient dairy and beef producers in particular.

But most organisations welcomed the fundamental shift towards a more market-orientated system of subsidy.

Alistair Mackintosh, Cumbria NFU county chairman, said: "I welcome being able to produce to our market but it is now vital that we receive a fair price for the commodities we produce. I think the supermarkets have got to play their part now. We produce the food to high environmental and animal welfare standards with much better traceability than anywhere and yet the supermarkets rush out and buy the cheapest they can find. We have done everything we have been asked to do, we have done what the public wants, I think the supermarkets have a moral responsibility now to play their part."