Ian Baker, Group Managing Director for Housebuilding at Galliford Try Homes said: “We are extremely surprised that the Liberal Democrats would make such an ill conceived policy suggestion.

“For many years the housebuilding industry has been working closely with government and treasury officials looking at the implications of such a move and it has always been accepted that it cannot be implemented. Introducing VAT at any level would fatally damage the housebuilding industry at any time and its ability to deliver much needed new homes in the UK.

“This is an example of a lack of understanding of the importance of the housebuilding industry in the UK and of the significant tax and legislative burden that the industry already carries.”

The Lib Dem plans would add up to £14,000 to the cost of buying an average newbuild property. The pledge is part of the LibDem manifesto.

Home Builders Federation chief executive Stewart Baseley said: “The Lib Dems’ plan is an extremely poorly thought through proposal that would constrain much needed housing development still further and potentially increase the cost of housing.”