Eighth time lucky for Loach as he finally wins Palme D'Or at Cannes

In a tremendous coup for British cinema, the veteran director Ken Loach scooped the top prize at the Cannes Film Festival last night for his film about the Irish war of independence. The Wind That Shakes The Barley won the Palme D'Or, beating 19 other films.

Loach, whose 1966 docudrama Cathy Come Home forced a change in the law regarding homelessness, turns 70 next month. But as his latest movie shows, he has lost none of his campaigning zeal. In his acceptance speech, Loach said he hoped the film was a "very little step" on the path to Britain confronting its "imperialist history".

The director, who has said the film about the early days of the IRA is also a critique on the US-led invasion of Iraq, added: "Maybe if we tell the truth about the past, maybe we tell the truth about the present."

The Hong Kong director Wong Kar Wai, who headed the jury, said the decision to award the Palme D'Or, the most important film prize outside the US, to Loach had been unanimous. Other judges included Helena Bonham Carter, Monica Belluci, Samuel L Jackson and Tim Roth. It was the eighth time Loach had been nominated for the Golden Palm, but the first time he has won it.

The film stars Cillian Murphy and Liam Cunningham as two brothers in early 1920s Ireland, when volunteer guerrilla fighters rose up against the British Black and Tans.

At the debut screening last week, Loach drew explicit parallels with the contemporary political situation, saying: "There are always armies of occupation somewhere in the world, being resisted by the people they're occupying. I don't need to tell you where the British now illegally have an army of occupation and the damage and the casualties and the brutality that is emerging from that."

He added that the war in Iraq was "illegal" and "an appalling scar" on the record of the British and American governments.

The award will come as a huge boost to the British film industry, although it was a co-production between five countries. The Wind That Shakes The Barley was filmed in Ireland and supported by the National Lottery through the UK Film Council.

In a further triumph for UK film, Andrea Arnold, a new director, won the jury prize for Red Road, starring Kate Dickie as a CCTV operator on a Glasgow council estate who spots a man from her past in video footage.

Loach, who studied law at St Peter's College, Oxford, made his name in television in the 1960s, when he created docu-dramas with the producer Tony Garnett. But it was his 1969 film Kes, based on the novel by Barry Hines, which ensured his reputation as one of Britain's top directors. Despite a difficult period in the 1980s, when some of his work was never broadcast, Loach has relentlessly pursued his individual brand of social realism. His films include Ladybird, Ladybird (1994), Land and Freedom (1995) and Ae Fond Kiss (2004).

The Spanish director Pedro Almodovar missed out on the top prize, but he was presented with the award for best screenplay, and the six actresses in his latest film, Volver (Return), were jointly awarded with the prize for best actress, including his long-time collaborators Penelope Cruz and Carmen Maura.

The best actor award was also an ensemble prize for the stars of the French director Rachid Bouchareb's Days of Glory about Muslim men who fought the Nazis in the Second World War.