Farmers will be paid for delivering benefits for nature and the countryside after Brexit instead of receiving subsidies for the amount of land they farm, Michael Gove has indicated.

Under the Europe-wide Common Agricultural Policy UK farmers receive around £3 billion a year in subsidies, mostly linked to the amount of land they farm.

The Government has pledged to maintain levels of funding up to 2022, but Mr Gove said ministers could only go on “generously supporting farmers” in the face of other demands on spending if the environmental benefits were clear.

In his first major speech as Environment Secretary, Mr Gove said reform of the system was needed, with payments for woodland creation, habitat protection, caring for treasured landscapes and higher animal welfare.

Mr Gove said: “The Common Agricultural Policy rewards size of land-holding ahead of good environmental practice, all too often puts resources in the hands of the already wealthy rather than into the common good of our shared natural environment, and encourages patterns of land use which are wasteful of natural resources.”

He said the UK should take the opportunity presented by leaving the EU to reward farmers for environmental protection.

Investigations by Greenpeace’s Energydesk have revealed that one in five of the biggest recipients of European farming subsidies in Britain are billionaires and millionaires on the Sunday Times Rich List.

Environmentalists want to see reform of the system to boost nature and protect UK wildlife.

The Country Land and Business Association (CLA), which represents 30,000 landowners, farmers and rural businesses in England and Wales, has also backed a move away from subsidies that simply pay people based on how much land they farm.

As the UK leaves the EU, the subsidy regime should be replaced with “land management contracts” – business contracts to manage land in ways that deliver public benefits, the CLA said.

Farmers would receive payments for delivering services such as storing carbon, managing water quality, connecting habitats, reducing flood risk or protecting famous beauty spots and important landscapes.

The moves could “end once and for all the divisive view that farmers are receiving subsidies for nothing”, CLA president Ross Murray said.

Mr Murray added: “Farmers and landowners want to run profitable, sustainable businesses. We want to produce quality food that receives a fair price and we accept the same risk and reward as any other business in our economy.

“Payments are necessary because there is vital work to be done across our countryside to manage soils and preserve the productive capacity of the land, to plant the trees we need, to clean and store water, to support the farming practices that make up our iconic landscapes or to make it possible for people to enjoy our beautiful natural spaces.

“These responsibilities bring costs and burdens that other businesses do not have to bear.

“That is why it is right to continue to invest public money in remunerating farmers to deliver the things people want from our countryside.”

The National Trust has also called for reform of the subsidy system to reward farmers for providing public benefits in the countryside.

Patrick Begg, National Trust rural enterprise director, said: “Michael Gove’s speech shows there’s a strong consensus that funding for farmers and land managers should be based on public money buying clear public benefits.”