THE Government has been told it will make the biggest agricultural mistake of any Labour administration if it fails to adopt the historic option for calculating the new single farm payment.

The National Beef Association said that selecting a hybrid system to fix decoupled subsidy payments from January 2005, would provoke a feeling of deep betrayal among farmers, who had accepted Defra's post-CAP reform ambitions as they understood entitlement would be allocated on the basis of historic coupled subsidy payments received over the 2000-2 base years.

Now, however, the NBA understands that Lord Whitty, Food and Farming Minister, is considering measures which could include the arable sector being hit with 100pc area, or flat rate average, payments and the livestock sector setting off with a 25pc area allocation, rising to 100pc over a number of years.

"We are struggling to understand why Defra has embarked on a late review which unexpectedly puts the industry under threat of having averaged entitlement payments forced on it immediately after CAP reform is adopted," said Robert Robinson, NBA national chairman.

They accepted that, perhaps in ten years' time, area allocation could be adopted but, if any flat rate element was introduced into post-January 2005 entitlement allocation, it wwould make it even harder for beef farmers to adjust to decoupling in the difficult start-up period.

Environmentalists said historic allocation favoured intensive farmers, but ignored its impact on marginal land and all holdings which rented in land, pointed out Mr Robinson. All rented land in England would carry an area entitlement of its own and there would be no naked land to which those who had rented in land could move their entitlement.

Flat rate allocation would cover every hectare in England and would put landlords in control of entitlement transfer, which was the key to setting both land prices and rental values.

"We find it amazing that a Labour Government, and a Labour Minister, are considering a system which will hand landowners a pot of gold and leave tenants struggling to cope with higher land costs when they were expecting historic allocation to reduce land charges, because it would break the link between land price and subsidy," said Mr Robinson.

All farmer-based organisations, including the TFA, are holding the historic payment line.