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Two Tory MPs have clashed on social media over Labour proposals to force landowners to sell plots below market value to cut the cost of housebuilding.

Labour is looking at changing the law to allow the state to compulsorily buy land for a price that excludes the potential for future planning consent.

Treasury minister Liz Truss said the idea was “deeply sinister” but Nick Boles replied “no its not”.

Landowners, he said, should not make a huge profit from the planning system.

The former minister, who has argued housing should be central to the Conservatives’ domestic policy agenda if it hopes to keep Labour out of power at the next election, suggested the idea merited cross-party support.

The Twitter exchanges were prompted by reports in the Guardian suggesting Labour was considering obliging landowners to give up sites for a fraction of their current prices to help pay for new council homes.

Land granted planning consent for new housing has a higher market value.

This boost in value can be very profitable for developers, private landowners and firms which specialise in purchasing land for development on behalf of institutional investors before selling it on – often to councils.

Labour is looking at changing the law in England to create a new sovereign land trust that would have the power to buy sites at closer to their pre-planning price.

By increasing the supply of land available, a lack of which is regarded as one of the biggest obstacles to housebuilding, Labour says it could cut the cost of building 100,000 council houses a year by almost £10bn.

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Agricultural land is valuable – even more so if planning permission is granted for housing

Labour’s shadow housing minister John Healey told the newspaper that “rather than letting private landowners benefit from this windfall gain and making everyone else pay for it, enabling public acquisition of land at nearer pre-planning permission value would mean cheaper land, which could help fund cheaper housing”.

The idea led to a vigorous debate between Ms Truss, who is Chancellor Philip Hammond’s number two at the Treasury and Mr Boles, a former skills minister who has accused Theresa May’s government of timidity and called for radical new thinking from his party on how to pay for the NHS, social care and housing.

Urging his colleague to “read beyond the headline”, Mr Boles questioned why a few landowners should receive a “windfall profit” on land sales when the taxpayer “bears the cost” of additional infrastructure required to go alongside major developments, particularly in rural areas.

When Ms Truss said she did not agree with “state-decided prices” being imposed on private companies and individuals, Mr Boles fired back that existing prices were not a product of market forces.

“They are the product of artificial scarcity created by the nationalisation of development rights and the introduction of the planning system,” he wrote, to which Ms Truss replied “quite”.

Last year’s Conservative general election manifesto said the party would change compulsory purchase orders to make it easier for councils to acquire land by “making it easier to determine the true market value of sites”.

Landowners said they were willing to consider incremental changes to the current planning system – but the Country Land and Business Association said its members would oppose any plan to “forcibly remove assets at artificial low prices”.

Theresa May has vowed to spend extra £2bn for new council homes and affordable homes over the next four years as part of a “national mission” to provide more homes to rent at affordable prices.

But critics say the promise of an extra 25,000 homes by 2021 was “paltry” and fell well short of what was needed to help the 1.2 million people waiting for council house accommodation.

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