The National Farmers' Union (NFU) and NFU Scotland (NFUS) said today that they accepted the need to shift the focus of the common agricultural policy (CAP) from production-based support to payments that are less market-distorting. But NFU president Ben Gill said farmers want a simpler, more market-focused policy that results in a more profitable farming sector.

The main thrust of the proposals, announced by agriculture commissioner Franz Fischler, are the decoupling of payments, which would remove the direct link between production and support, and degression, meaning increased taxation of farm payments.

Gill commented: 'Many of the proposed reforms to CAP announced today are on the right lines. If introduced in the right way, the proposals will help the EU meet its international obligations while improving farm profitability.' However, there are items of concern in the detail and the NFU will fight to correct these. Some aspects of the proposal are divisive and need to be addressed. UK agriculture is concerned about the proposal to reduce farm payments as a consequence of the recent deal to freeze the European Commission's agriculture budget.

Lumbered with a fixed budget until 2013, thanks to a deal between France and Germany, the EC has used the modulation proposal to raise some of the money required to finance reforms to the dairy sector and probably other sectors in the future.

Gill said this effectively means that a mechanism designed to fund rural development programmes by reducing direct payments to farmers has been expanded to fund the reform of other agricultural sectors.

NFUS president Jim Walker added: 'Reform of CAP is crucial, but the proposals released today could have disastrous results for the Scottish industry and spell the end for many farm businesses, with all the knock-on consequences for the rural economy, environment and consumer choice.

'The commission's buzzword modulation has been replaced by degression – a far more accurate description of the taxation of farm payments. Scotland is the classic example of how modulation has completely failed in its objectives. Thousands have been modulated and yet only a handful has benefited from the supposed wealth of environmental funding. The fact that France saw sense to drop their own modulation policy, and that no other EU state has gone near it, speaks volumes for its effectiveness.' At the time of the Schroder/Chirac deal, the NFU pointed out the problems associated with fixing a budget before the actual reforms were agreed or costed.

'As a result of the stitch-up by the French and the Germans,' said Gill, 'farmers are left with the bill. Not only that but the bill is being paid by Europe's larger farmers rather than across the board, which is hardly an equitable approach and one the NFU will be lobbying against. If modulation has to be the way forward, it should be applied equally to all farmers.' 'If the Commission wants to live up to its principle of subsidiarity,' said Walker, 'it must give flexibility to member states to target support to its own individual strengths. Without that ability, the very real likelihood is that we will see a reduction in Scotch beef production, at a time when consumption is higher than ever. For cereal farmers, the Commission's mantra of 'freedom to farm' also appears to ring hollow when it plans to continue with compulsory set-aside.' The NFU was pleased the commission took on board its concerns about capping support payments and has dropped its original proposal to limit support to individual farms to E300,000.

It adds that the EC's plan for a single farm payment to replace commodity-based subsidies, known as decoupling, is correct in principle but some vital details need correcting.

Walker stated: 'There is a long way to go before these proposals become policy, and NFUS will be fighting to ensure that the commission respects the strength of agriculture in Scotland and does not sacrifice our members to pay for EU enlargement.' And Gill concluded: 'The practical application of the decoupling concept was always going to be complicated but, if successful, it has the potential to improve the market focus of the CAP and provide a simpler and more transparent system.'