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The Agriculture Act, depression and subsidy

Halcyon days

The First World War had put in place a state regulated and subsidised system of agriculture that increased the pay of farm workers, the profits of farmers and the productivity of the land. The system continued after the war. Many tenant farmers took the opportunity of the early post-war boom to buy their farms from their landlords. The increase in Schedule tax on income from land was at a historically high level, which encouraged landowners to convert a highly taxed income into zero-tax capital gain. Nearly a quarter of agricultural land was sold by the end of 1922.

An oat shortage in 1920 meant that the high prices farmers could charge not only provided them with considerable profits, but also produced a bill of up to £15 million for the government as it subsidised the sale of oats to the public and food producers. 

Repeal of the Agriculture Act

This system stayed in place until 1921, when the Agriculture Act - guaranteeing minimum wages and minimum produce prices - was repealed. The government was facing a potential £20 million subsidy bill for the agricultural sector, when other parts of the economy did not have such protection, and high food prices were not popular with a predominantly urban electorate.

The result was a rapid reduction in agricultural wages by as much as 40 per cent in one year, and the increased indebtedness of arable farmers. The removal of restrictions on Canadian grain was combined with reluctance by the government to intervene in the agricultural sector. These additional blows resulted in further falls in productivity, increased rural poverty, emigration to towns and some land lying waste, even in fertile areas such as Norfolk. Agriculture did not fully recover until the Second World War.

Consolidation and the return of subsidy

Minor recoveries in grain prices in the mid-1920s improved matters, but were cancelled out by the depression from 1931 onwards. Dairy farming did not suffer as badly, and some agricultural sub-sectors, such as eggs and cheese, moved to more efficient 'industrial' methods, particularly in Lancashire and Wiltshire.

The creation of marketing boards for various agricultural sub-sectors (such as milk and potatoes) in the mid 1930s helped to improve coordination, moderate prices, direct production and control imports. Also, the early 1930s saw tariffs reintroduced for a number of products such as wheat, soft fruit and potatoes, and farmers were quick to take advantage. By the late 1930s, the situation in the agricultural sector had improved from the difficulties of the early 1920s and early 1930s.