The new policy was broadly welcomed

Under the measures, subsidies handed out to farmers will no longer be linked to the amount they produce.

Deputy Rural Development Minister Allan Wilson said the changes will place the future back in the hands of farmers.

The measures form part of widespread reform to the EU-wide Common Agricultural Policy (CAP).

Farmers will now receive a single payment with the condition attached that they must use environmentally-friendly farming methods.

It means that from 2005 there will be a full decoupling of subsidies for arable, beef, dairy and sheep farms.

We will shift subsidies away from merely supporting production to recognise the economic, social and environmental contribution that agriculture makes to rural development Allan Wilson Deputy rural development minister

Mr Wilson said the changes will give farmers greater control over their affairs and cut red tape.

It is also hoped the move will reduce the build-up of EU food mountains.

"We will support the more rapid development of environmentally sustainable farming which provides consumers with quality products," he said in a statement to MSPs.

"We will shift subsidies away from merely supporting production to recognise the economic, social and environmental contribution that agriculture makes to rural development."

Mr Wilson added: "Producers will make decisions in response to the market and not in response to subsidy scheme rules or incentives - this will encourage sustainable farming.

"The form-filling and bureaucracy associated with six main support schemes at present will be reduced with the introduction of the single farm payment."

Future for farming

Farming leaders, opposition MSPs and environmentalists largely welcomed the announcement, as did the Scottish Landowners' Federation (SLF).

The National Farmers Union Scotland (NFUS) said it was a significant boost to the agricultural industry, the countryside and the rural economy.

NFUS president John Kinnaird said: "I firmly believe the executive's approach to CAP reform will benefit the Scottish countryside and rural economy to which the Scottish farming industry is central.

Reforms cover arable and livestock farming

"The reform presents a challenge to the industry but I believe it also sets the foundations for a viable future."

The Royal Society for the Protection of Birds said it was an important first step in re-directing public susbsidy towards protecting the environment.

And the Scottish Wildlife Trust said moving "at least" 10% of the subsidy to supporting the environment and rural development was a welcome start, although it wanted to see 20%.

SLF convener, John Don, said: "Production will no longer be the driver of the CAP, but support to farmers themselves underpins the fact that farming activity remains at the heart of a thriving rural economy."