Scenic Ladbroke is set to become a flashpoint over plans for HS2, the 200km high-speed link between London and the Midlands

For centuries Ladbroke, a picturesque Midlands village recorded in the Domesday Book, has been the sort of place where people aspire to live. With its coaching inn, 12th-century church, village green, Grade II-listed houses and active Women's Institute, it is the quintessential English idyll, a tranquil haven in the splendour of the Warwickshire countryside.

But not for much longer. The village, which has a population of 250, lies within metres of the proposed High Speed II (HS2) rail link between London and the Midlands that the government hopes will help to make domestic flights a thing of the past. Residents have expressed outrage at the plan, which has made their homes difficult to sell, while claims for compensation will take decades to be approved.

Now the village's plight has seen it pushed to the forefront of a vocal alliance of 40 groups stretching along the proposed 125-mile route that runs through areas of outstanding natural beauty such as the Chilterns and Warwickshire's Forest of Arden, creating a "noise corridor" up to four miles wide.

A flagship project of the previous government now under consideration by the new coalition, HS2 is set to provide the next key skirmish between conservationists and politicians after high-profile battles to expand Stansted Airport and build a third terminal at Heathrow.

Ladbroke, where the gunpowder plotter Robert Catesby had a manor which is thought to have been used later as a lookout point during the civil war, is likely to be one of the flashpoints. Its position on a flood plain means that the track would run past the village on a 40ft-high, three-mile viaduct visible for miles.

"Parts of the village will become uninhabitable," said Graham Long, chairman of the Ladbroke Action Group and a director of the HS2 Action Alliance. "We will end up with a kind of ghost village at one end, which will be completely unoccupiable, and a live village on the other."

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Independent reports commissioned by opponents of the route suggest that the trains, which may run as frequently as once every two minutes at peak times, will generate noise levels of 74 decibels as far as 100 metres from the track – the equivalent of the sound of a pneumatic road drill. Government regulations stipulate that houses cannot be built close to infrastructure projects that generate noise levels above 66 decibels.

Apart from the noise, there are concerns about the rail link's visual impact on the English countryside. The Chiltern Society warns that the project "is a mass of iron and steel and concrete and noise that will leave an indelible, ugly scar across one of the most beautiful areas of England. It will cause an unforgivable blight".

But the government thinks there is a strong case for HS2, which would allow trains to travel at almost 250mph, cutting journey times from Birmingham to London to 49 minutes, compared with the current 84 minutes.

Philip Hammond, the transport secretary, said the £13bn project was one of several under consideration that "can justify themselves economically'' and "one of the best investments the taxpayer can make".

The first phase of the project would start in 2017, with an operational target date of 2026. An expansion of the route, linking up with Manchester and then Glasgow, would not be in place until the 2030s at the earliest.

Residents living near the proposed route – which skirts past Stoneleigh, near Coventry, up to Hampton in Arden – have expressed anger at how they were informed about it. "The first we knew of it was when we heard it on the local radio," said Steve Copley, a retired church warden who lives in Ladbroke. "Now the village is blighted and nobody will buy a house here."

Campaigners have attacked Hammond's claim that HS2 will see domestic flights become a thing of the past, pointing out that there are no commercial flights from Birmingham to London. But the plan has won unexpected backing from Coventry-born pop impresario and rail enthusiast Pete Waterman, who said the project would have economic benefits. "Bugger Coventry," Waterman said with characteristic frankness. "This will benefit the whole country."

The HS2 Action Alliance has also attacked the updated compensation arrangements quietly unveiled by the government last week. An interim emergency hardship fund has been established for people who urgently need to sell their homes, such as those facing repossession, but few property owners along the proposed line qualify. It has emerged that the government has only set aside £15m for the fund, which campaigners claim will be insufficient.

Properties directly on the proposed route will be issued with compulsory purchase orders, but the vast majority of those that will be affected by noise will not be able to claim until the project has been running for a year. The HS2 Action Alliance complains that this criterion was drawn up just after the second world war and fails to recognise the impact of modern infrastructure projects.

"We are sitting here in 2010; our property and our lives are blighted and many of us are not subject to compulsory purchase orders, but we will be within very close distance to this very fast line," Long said. "But we won't be in consideration for blight provisioning until one year after the line opens, which makes it 2027 until we can claim; it's hideous."

It has been claimed that residents living alongside High Speed I, the line that runs from London St Pancras through Kent to the Channel Tunnel, saw the value of their homes fall by 30% but received only between 5% and 10% in compensation.

More than 4,500 people responded to the consultation on the planned compensation package, most to express concerns that they will face hardship.

"While we recognise the climate of austerity, the government should appreciate that, if HS2 cannot pay for the damage it does, including the cost of fair compensation, then HS2 cannot be in the national interest," said Hilary Wharf, director of the HS2 Action Alliance.

An interim report on the future of High Speed II is due to be made to parliament in October, with a full consultation expected to take place early next year.