Failure by government to match-fund farmers’ contributions to rural development could damage the environment and place British farmers at a disadvantage to their EU competitors.

Addressing an NFU fringe meeting at this week’s Liberal Democrat conference in Brighton, environment spokeswoman Baroness Miller said British farming had been “sold down the river” by Tony Blair’s EU budget deal in Brussels last December.

This left the so-called Second Pillar of the common agricultural policy seriously under-funded, but also paved the way for the UK government to apply national voluntary modulation, without any obligation to match-fund it, as has been the case in the past.

Baroness Millar said that the Liberal Democrats would be pushing hard for the Treasury to come up with the additional money, to lessen the burden that will be placed on British farmers.

But she was not optimistic, given that the Treasury had already cut spending on flood defences, despite government claims that tackling climate change was one of its top priorities. “It’s a criminal thing to do,” she said.

NFU deputy president Meurig Raymond also urged the Treasury to dip into its coffers. The NFU has estimated that for England alone there could be a £300m funding gap for environmental schemes over the next seven years, which would require 20% national modulation to plug.

“If we do not receive any match funding, we will suffer from a rate of modulation that puts us at a huge disadvantage to our EU colleagues,” he said.

Mr Raymond was particularly incensed by the lack of recognition emanating from government about the contribution farmers have already made to reversing environmental damage and the extent of reform to the CAP they have faced.

“I find it very frustrating when Gordon Brown argues for further CAP reform and does not recognise that we are going through the biggest change we have faced since 1947,” he said.

British farmers spent an estimated £400m a year on preserving the landscape, he said, yet this was not rewarded by the market.