English farmers could lose cash handouts from Brussels next year unless they agree to make environmental improvements to their land.

The European Commission is to announce today an end to the controversial set-aside payment scheme - under which farmers were paid to leave about 8 per cent of their fields fallow - as part of further reform of the Common Agriculture Policy (CAP).

The payments, intended originally to prevent the creation of grain mountains in Europe, are regarded as outdated, given the worldwide shortage of grain that is being driven by demand from China and India.

The payments were suspended this year, but the European Union has ruled that this should now be permanent. Farmers will continue receiving payments from the EU, however, if they make environmental improvements to between 3 per cent and 5 per cent of their land. They will have to agree to keep field margins next to rivers, canals and streams out of production and free from pesticide sprays. French farmers receive handouts from Brussels under the same arrangement.

However, there are fears that the measures will not be sufficient to replicate the environmental benefits of set-aside land. Hilary Benn, Secretary of State for Environment, Food and Rural Affairs, is under pressure to impose stronger conditions than those set by the EU.

Sir Don Curry, architect of the Government’s strategy for sustainable food and farming, has sent a report to Mr Benn calling for a new mandatory land standard to apply to all farmers and owners who claim subsidies.

EU member states, including the devolved administrations in Britain, are allowed to set their own rules on how landowners must manage their land to benefit the countryside.

The loss of set-aside land in England this year has enraged environmental and conservation groups, including the Government’s own advisers, Natural England and the Environment Agency. They fear that it has led to a decline of farmland birds and has destroyed other wildlife habitats.

A survey conducted by the Department for Environment, Food and Rural Affairs (Defra) found that about 50 per cent of the 900,000 acres of previously unploughed land in England is already in production this year.

The National Farmers’ Union is concerned that its members will be disadvantaged by stricter regulations that do not apply to competitors in Europe.

The union is also concerned that English farmers are likely to be treated less fairly than their counterparts in Wales, Scotland and Northern Ireland.

The Royal Society for the Protection of Birds is pressing for farmers to be compelled to guarantee minimum green improvements on their land in return for their subsidies.

Gareth Morgan, head of agriculture policy at the RSPB, said: “The CAP health check is a missed opportunity for the environment. This is a golden opportunity for the Government to turn its rhetoric about CAP reform into reality. We hope that England, Scotland, Wales and Northern Ireland will now make sure that farm subsidies are properly linked to environmental benefits and the public good.”

Defra has commissioned a series of reports to help it to reach a decision. The British Trust for Ornithology has been asked to conduct scientific modelling on the impact that the loss of set-aside land has had on farmland birds. The Central Science Laboratory is examining the impact on wild plants and flowers, the Environment Agency is checking if water courses are more polluted, and Natural England is to report on any impact on the landscape.

About 120,000 claimants receive a total of £1.6 billion in single-farm payments in England. The total CAP bill for Britain is £3 billion.

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