Traders, shoppers and councillors have reacted angrily to long-term proposals which could see Dereham's biggest and only free car park lose up to 180 spaces to new homes.

The Cherry Tree car park, close to the war memorial, could be reduced in size within the next 20 years under Breckland District Council's ambitions to maximise its commercial assets. Those outline plans suggest that 40pc of the car park could be redeveloped to build five houses.

A senior Breckland councillor described the plan as a 'kite-flying' exercise to float the idea, and any solid future proposals would need to be agreed by a planning committee.

But Robin Goreham, a Dereham town councillor and former chairman of Breckland, said Dereham's only free-all-day car park is a 'huge strategic instrument' in encouraging people into the town.

'It is so important to the lifeblood of the town,' he said. 'Cherry Tree is desperately needed to be run as a car park.'

Breckland, which owns 188 commercial properties across the district, has identified the car park as one of 28 key areas which could refurbished and redeveloped over the next two decades with the help of a private investor. There are eight priority assets which the council hopes will be worked on in the next five years including sites in Shipdham, Mileham and Litcham.

The council wants to use a Local Asset Backed Vehicle (LABV) to achieve this, which would see private sector money and skills combined with public sector assets such as property and land to accelerate growth in the area and increase the financial return – which the council says will generate cash to protect frontline services.

But Tim Grange, the manager of Dads and Lads barbers on the front edge of the car park, said any reduction in parking would be damaging to both businesses and the town in general.

He said the 17-year-old salon relied on its customers being able to drop-in for a haircut because of its no-appointment policy, and staff needed a place to park for the day.

'I think it's a stupid idea and I can't see it working – it would damage the town,' he said.

'That car park is full every day, and one of the reasons we are so busy is because people can drive through, park and have their hair done, so the changes would really affect us.'

There are also fears about the effect on Dereham as a shopping destination in mid Norfolk as all other car parks in Dereham have a two or three-hour limit.

Philip Webster, 65, a technician from Longham, said the reduction in parking spaces would discourage people from going into the town to use its facilities.

'People like to come to Dereham for the free parking,' he said. 'When you tell people about the town when they are coming here, the first thing you say is that Cherry Tree is free all day. And that's one thing people care about when they are going shopping, how much it is going to cost?'

But while Robert Hambidge, a town councillor in Dereham, labelled the proposals a 'joke', Mark Kiddle-Morris, Breckland's executive member for assets and strategic development who has been working on the LABV scheme, said the proposals are long-term and a 'kite-flying' exercise to put the idea 'out there'.

He said: 'It would be a partnership [with the private partner] but it would have to be agreed by Breckland councillors.

'It's a long way off and there are a lot of things to think about.'

Mr Kiddle-Morris did concede that losing the car parking spaces from the centre of Dereham would be 'disastrous and would force people to go somewhere else'.