The Spanish government will attempt to seal a deal with regional authorities to demolish illegal buildings along the country's coast, many of which are owned by Britons.

Since evidence emerged of widespread corruption leading to apartments and villas being built on public land, many local municipalities have refused to remove buildings that they had allowed to be built.

Now, Cristina Narbonna, the environment minister, will attempt to persuade them by offering €5 billion (£3.5 billion) towards the demolition costs.

One million Britons own homes in Spain and many have discovered, only after purchase, that their property was built illegally.

"A classic example is in Benidorm where the town hall is at loggerheads with Madrid over the building of a massive twin tower block which will overhang the sea" said John Seth-Smith, a local insurance broker who was, until recent Foreign Office cuts, the honorary British consul.

"Some Britons have bought flats, but now don't know if they will get them." Mr Seth-Smith said the builders involved were demanding €1 billion (£700 million) in compensation should the construction work be halted.

Many Benidorm councillors are involved in the hotel or construction business, either directly or through their families.

The minister appears to have been spurred into offering funds by a report published by her ministry this month, "The Strategy for Sustainability of the Coast", and a general election due next March.

The report not only highlights the wholesale destruction of the coast, especially the Mediterranean costas, where 60 per cent of the land has been built on, but also the serious deterioration, aggravated by artificial marinas and piers, of 70 per cent of dunes and 51 per cent of beaches.

Andalucía, in southern Spain, which includes Almeria and the Costa del Sol, is one of the worst offenders regarding illegal development.

The regional socialist government has been in power for more than 20 years and has been accused of allowing illegal building everywhere in return for favours.

The Seville-based regional government claims not to have noticed a €2 billion (£1.4 billion) property scam run in Marbella for many years, which is now the subject of a huge criminal investigation.

A 1998 law was supposed to draw the line between public and private land around the whole Spanish coast but it has been widely ignored.

Last year more than 800,000 homes were built in Spain, more than in Britain, France and Germany combined.

Many British owners of Spanish homes are also facing potentially major losses as the supply of housing is outstripping demand.

The recent government report also gave warning that climate change could lead to a drastic reduction of Spanish beaches and could mean many property developments will be under water by 2050.