The UK Government plans to throw a lifeline to struggling farmers by allowing them to choose whether to receive their Brussels subsidies in sterling or euros.

The proposal - likely to become reality next year - will be only a small step to resolving the crisis in British agriculture.

But, especially for bigger farmers, using the single European currency could lead to significant savings.

At present the subsidies, which are available for a bewildering range of of farming activities, are paid only in sterling.

Hardware update needed

Payments are made automatically by computers at the Ministry of Agriculture, Fisheries and Food (MAFF). But one problem is the need to alter - or even replace - the computers to cope with both currencies.

It will be expensive, and will put an extra strain on MAFF staff already having to cope with farmers' general financial worries, the BSE Inquiry, and heightened concern over food safety.

The European Union is also concerned to ensure the new system will not allow any farmer to make an unearned profit.

To ensure they cannot use the system by choosing to be paid when the euro-sterling rate is most advantageous to them, it will set in advance the dates when the subsidies can be cashed.

Brussels may help a little

The farmers most likely to benefit from the scheme are those with fairly large farms who are buying supplies and equipment from abroad.

A farmer importing machinery or fertiliser, for example, from one of the 11 EU countries in the 'first wave' of the single European currency could pay for the imports in euros, making a saving on exchange rates.

And farmers who are borrowing heavily could end up better off, too.

Cheaper loans

British farmers are paying about 10% interest on their loans at the moment, according to the National Farmers' Union.

But with rates at about 3.3% in the first wave countries, there are big savings to be made there.

A farming source said: "The new plan is not going to end the crisis. But it could give some farmers valuable help".

The scheme may not come in until 2000, but farmers hope it will be much sooner. MAFF is expected to announce its intentions shortly.