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Subsidy and the EEC

Assistance for small farmers

Between the 1950s and 1960s, the profitability of agriculture made farming more attractive to landlords, so that owner farmers tended to replace tenants and farms were consolidated into larger units. During the late 1950s and early 1960s, the government made specific provisions for assisting small farmers through grants and improvement schemes. In 1967, compensation was paid to farmers hit by the foot and mouth epidemic.

Mechanisation and continued subsidy

There was also great technological change as farming became increasingly mechanised. Mechanisation produced rapid gains in productivity, but the number of agricultural workers was greatly reduced. Subsidy remained the basis of agricultural prosperity through to the 1970s. The government subsidised prices for a wide range of products, both arable and pastoral (and also fertiliser and animal foodstuffs), but the nature of subsidy changed over time. With the end of rationing in 1953, the government ceased to be the major purchaser of agricultural produce, which was again sold and bought in a free market. By the mid-1950s, food surpluses tended to depress world prices. The amount of subsidy necessary to keep British farmers in production therefore tended to increase over time. The annual round of negotiations between the <<National Farmers' Union>> and the Department of Agriculture, known as the Farm Prices Review, was a complex exercise. The expanding agricultural subsidy undermined public regard for the industry and became the subject of much criticism. The government attempted to control the subsidy through the annual farm prices review in order to reduce the burden on the Exchequer. These attempts were, however, undermined by the balance of payments difficulties during the 1960s. The government needed to reduce agricultural imports, but this could only be managed through the subsidy.

Admission to the European Economic Community (EEC)

Admission to the EEC in 1973 produced significant changes in the nature of the agricultural subsidy, as Britain became part to the Community's Common Agricultural Policy (CAP). Under the British system, the subsidy was the difference between the market price for produce and the price required for farmers to maintain a reasonable living. Under the CAP, individual commodities were allocated a price across all the member states. These prices were maintained by intervention (the buying and storing of products when the price fell below a certain price). The CAP also used import tariffs to prevent cheap imports. It resulted in the excessive storing of surpluses, most famously in the butter and grain 'mountains' and the wine 'lake'.

Subsidy

Under the British system, the subsidy came from general taxation, to which the better off contributed more than the poor, while at the same time allowing consumers continued access to cheap food at world market prices. The EEC system effectively passed the subsidy onto the consumer via artificially inflated prices. Moreover, the EEC system would have international implications, since most of Britain's food imports had traditionally come from non-European sources, and over half from the Commonwealth, which would now be affected by the common external tariff.