THE Government is expected to announce soon whether it agrees to the industry's proposed three-region single farm payment system.

Prof Allan Buckwell, chief economist with the Country Land and Business Association, this week said he hoped the proposal would be approved, but told a meeting at Hexham mart: "That will not be the end of the story. There will be plenty of farmers with land in all three regions and the question is, how do we calculate their payments?"

The industry group met last week and discussed that very point.

Prof Buckwell, speaking on Monday, said he expected Margaret Beckett, Defra Secretary of State, to announce her decision this week or next. "If the Secretary of State rejects the proposal, what we do then I just don't know. Do we take our tractors to London?

"If she does not accept it, it will be very bad news for dairy and beef cattle in the severely disadvantaged area fringe; we have stressed the environmental reasons as well."

Prof Buckwell said that, even with the better payment rates under the three-region system, many SDA farmers would struggle.

He understood Mrs Beckett had originally been keen on England being one region with a £190/ha payment. That would have meant the moorlands receiving far more than they had historically earned and she was persuaded to have two regions, using the SDA line as the boundary.

"It only took about one and a half days for the telephones in Belgrave Square to hum and e-mails to pile up from people in beef, dairy and arable in the SDA," said Prof Buckwell. "When they were told they would get £75/ha, they said it would put them out of business."

Lowland producers would also have resented £35m going to the hills which had not gone in the past.

A second solution was to use the moorland line, with £30/ha paid above it and £203/ha be-low. It would have involved £61m going from the lowlands to the SDA fringe.

The industry compromise and alternative was three payment regions - SDA moorland would receive £30/ha; the rest of the SDA £120-£150/ha and the rest of England £211-£230/ha.

"The solution was put to Mrs Beckett on March 18," said Prof Buckwell, "She was abroad and has been out of the country since then, but we expect an announcement this week or next."

However he warned farmers not to expect to actually receive the amounts which were finally confirmed. Deductions would be made before payments were issued, to fund the national reserve, modulation and financial discipline if the CAP budget looked likely to be exceeded.

Prof Buckwell estimated the £211/ha figure could be reduced by as much as £32/ha, and some forecasters had predicted even more.

Another major factor was that payments would depend on the £/euro exchange rate. He had used Defra's exchange rate figures, which had been 70p/euro at the time. "For every 1p fall in the rate, there is a £25m drop in total payments, about £3/ha," said Prof Buckwell, "The current rate is 67p/euro."