* Top UK food retailer commits to buy more British meat
* Horsemeat scandal drives push for local sourcing
* Britain may cut direct subsidies to farmers
By Nigel Hunt
BIRMINGHAM, England, Feb 27 (Reuters) - Farmers in England fear reforms to agricultural policies in the European Union will give them a worse deal than many of their competitors, undermining a drive for local sourcing which has been fuelled by the horsemeat scandal.
EU reforms are expected to give member governments the option to cut direct subsidies to farmers by up to 15 percent and shift funds into other schemes linked to "providing public goods" such as enhancing the environment or helping young people get started in the industry.
Britain is a key backer of the option and has long supported a move in funding away from subsidies and into such schemes.
"If there's one single message that's come from the horsemeat scandal, it's that our consumers want to know their food is coming from as close to home as possible," National Farmers Union president Peter Kendall said on Wednesday.
"We need you to work with that message when you're making decisions on greening, modulation (shifting funds) and environmental schemes," Kendall said, addressing Britain's farm minister Owen Paterson who was attending the NFU's annual conference in Birmingham.
"Defra (Britain's farm ministry) has negotiated the right to cut English farmers' payments by up to 15 percent. That's intolerable to us in the NFU and to our farming partners."
Tesco, Britain's biggest retailer, said on Wednesday it would buy more meat from its home market as part of its response to the discovery of horsemeat in beef products that has shaken consumer trust in supermarket supply chains.
"Today I'm announcing a sincere commitment to source more of our meat closer to home. Where it is reasonable to do so we will source from British producers," Tesco chief executive Philip Clarke told the conference.
Devolved governments in Scotland and Wales make key decisions on farming in those countries so any shift in funding led by Britain's farm ministry would only impact England.
The NFU formed a coalition on Wednesday with the Tenant Farmers Association and the Country Land and Business Association, which represents landowners, to seek "a fair deal" for English farmers on CAP reform.
Britain's farming minister Owen Paterson said, however, that the skill of farmers in producing products consumers wanted was the key factor in determining the success of a farm business rather than any discrepancy in subsidy payments.
"I do believe there is a real role for taxpayer's money in compensating farmers for the work they do in enhancing the environment and providing public goods for which there is no market mechanism," he said.
"The budget agreement will allow us to transfer money from Pillar 1 (subsidies) to Pillar 2 (schemes which provide public benefits). This means we can have more money to spend supporting the long-term future of farming."
Gerd Sonnleitner, president of European farmers' group COPA, told the conference he was concerned about the shifting of funds.
"This could completely undermine our attempts to reduce the gaps between the different levels of hectare payments. It risks putting many farmers at a completely unfair competitive disadvantage and undermining the single market," he said.