GRAVE concern has been expressed over the mid-term CAP reform proposals announced last week.

Under them, Britain's farmers will lose up to £300m a year in support payments from 2007.

The farming and rural business group of the Institute of Chartered Accountants said subsidies would be paid in the form of one annual cheque, which would be based on the average of claims made under most schemes during the last three years.

"The problem with this in some areas is that many farmers' claims were substantially reduced in recent years owing to foot-and-mouth disease," said Robert Wharton, the group's northern spokesman. "This will lead to many appeals being made once figures are known."

The group has urged the Government to promote a thriving rural economy by treating all farm activities as one trade for tax purposes. This would allow new projects, such as holiday lets, visitor centres and other attractions, to support a scaled-down farming business.

"The risk is that continuing the squeeze on farming will leave the countryside looking very different from the one we see today," said Mr Wharton.

CSH, northern rural development consultants, also expressed serious reservations about the proposals.

Athole McKillop said the majority of British farmers would see payments reduced by up to 19pc by 2012.

Safeguards to protect smaller farmers would result in the larger, more efficient British farms suffering the biggest cuts.

"Even worse, money deducted from British farmers for rural development schemes may be put in a communal pot by the European Commission and distributed across the member states," said Mr McKillop. "The criteria for receiving these grants may mean that more and more money goes to the southern, and new Eastern European, member states.

"The British Government, and Defra in particular, must act quickly to make sure that an already beleaguered community is not penalised even further."

Dorothy Fairburn, Yorkshire regional director for the Country Land and Business Association, said the Government must fight hard if British farmers were not to be the major losers.

The reforms would not only have a disproportionate impact on the UK but could seriously damage the UK's own rural strategy.

"The principle of decoupling support from production in order to reward good environmental practice, foster rural development and reconnect farmers with consumers is, we believe, the right one," said Miss Fairburn. "This must, however, be achieved in a way that is fair across all EU member states, rather than favouring some over others."

The UK currently received 13pc of total CAP direct payments, but could end up paying twice this share of the cost of the reforms.

By contrast, France received 28pc of direct payments and could end up paying less than this share of the reform costs.

The CLA believed a fairer option would be a simple flat-rate cut in all direct payments to enable funds to be switched to Pillar 2 to provide the money for further reform.

According to the CLA, the new proposals retreat substantially from the commitment to switch from production support towards environment and rural development, compared with those contained in the July 2002 reform paper.

"It is questionable whether the projected funding to be switched to Pillar 2 would be sufficient to achieve the hoped for environmental and rural development benefits," said Miss Fairburn. "While it makes sense to decouple payments from production, it does not make sense to decouple them from land.

"If real environmental benefits are to be achieved and the public is to see something for its money, the payments must be linked to activities on specified land. It is still not clear how the environmental conditions applied to the decoupled payments will be implemented.

"The fact that the UK has already gone further in using the voluntary fund switching than any other member state, and has plans to increase this in two years when the new stewardship scheme is rolled out, must be explicitly recognised. We must not be penalised for being ahead of the game."

The Tenant Farmers' Association, however, welcomed the fact that the proposed annual payment would not be linked to land which would have been damaging to those who did not own the land they farmed.

The Commission's proposal is that the new payment entitlements should be capable of transfer without land.

George Dunn, TFA chief executive, stressed that, at this stage, the plans were still proposals. "A close eye will have to be trained on any Commission implementing regulation and also on the domestic legislation that will introduce the scheme for our producers," he said.

"We are not home and dry by any means, but we have surmounted the first and a major hurdle in the process."

The TFA would continue to keep it a major lobbying priority