An influential House of Lords committee has called for the swift reform of the Less Favoured Areas (LFA) scheme.
Members of the EU Committee on Environment and Agriculture have been examining European proposals to reform LFA payments.
Financial support should be channelled to farms that contributed most to the landscape and were least able to generate an income, it said.
Their report stresses that LFA payments aim to maintain farming in marginal areas where it benefits the environment, rather than to compensate for economic hardship.
Other EU funds offered more targeted and cost-effective means of addressing the socio-economic problems faced by disadvantaged agricultural regions, it said.
Committee chairman Lord Sewel said it was vital the scheme was reformed quickly.
“The Less Favoured Areas scheme is in need of an overhaul to ensure it performs the function for which it is intended.”
Historically, the scheme had been perceived as a means of providing support to marginal areas to prevent farmers leaving the land, said Lord Sewel.
But other specially adapted policy instruments for achieving those goals had been put in place since Europe’s rural development policy was reorganised in 2005.
Lord Sewel said: “The LFA scheme now needs to be adapted to its new role within that wider framework.”
The committee report recommends continued and vigilant assessment of the public benefit of LFA spending.
“Society does not owe unconditional support to farmers wishing to farm in areas affected by natural handicaps,” says the document.
It supports European Commission proposals to establish a set of EU-wide biophysical indicators.
These indicators would identify disadvantaged areas based on natural handicaps such as poor soil, extreme climate and steep slopes rather than economic hardship.
But the committee warns that the proposals may need to be modified to take into account the particularities of the UK and Irish maritime climate.
Wetter weather meant British and Irish farmers faced different challenges than those faced by mainland European farmers.
Criteria might have to be adapted to recognise that consistent rainfall posed a genuine handicap to farmers in the UK uplands.
The committee also called for a common EU-level framework to determine whether farms in Less Favoured Areas qualify for aid.
And it welcomed recognition of the need to clamp down on criteria irrelevant to scheme objectives, such as farmers’ age, or place of residence.
Aid should primarily be targeted at extensive farming systems, but the criteria used should not rule out mixed farming, the committee said.
Rules should leave sufficient flexibility to each country and region to channel aid as it saw fit, said the committee report.