THOUSANDS of wheelie bins have been secretly fitted with bugs as the Government comes under increasing pressure to charge households for collecting non-recyclable waste.

The penny-sized electronic chips could be used to fine homeowners who exceed any weight restrictions imposed on rubbish. They have been fitted to about 500,000 bins across England.

Their existence was revealed as the Institute for Public Policy Research urged the Government to start billing households according to how much waste they produce.

Britain has the third worst recycling rate in the European Union, according to figures published yesterday by the institute, an influential centre-left think-tank.

Its warning was backed by the Local Government Association (LGA), which threatened to increase council tax bills if recycling did not improve. It said that this tariff would be needed to cover EU fines.

Councils face penalties of up to £150 per tonne of rubbish if they fail to meet recycling targets set under the EU landfill directive. This could lead to a bill of £230 million.

Sir Sandy Bruce-Lockhart, the LGA chairman, said: “For decades people have been used to being able to throw their rubbish away without worrying about the consequences. Those days are now over.

“There needs to be a radical overhaul of the way in which rubbish is thrown away, otherwise there is a real danger that council tax bills will have to rise and the environment will continue to suffer.”

The tag is screwed into a recess under the bin’s lip. It contains a silicon chip with a serial number identifying the home to which it belongs.

This is detected by a sensor on the truck as the bin is lifted for emptying. The weight of the rubbish it contains is calculated by equipment on the truck. This information is then transmitted to a central computer.

Plans to charge for the collection of non-recyclable rubbish have already been mooted.

David Miliband, the Environment Secretary, indicated last month that he backed a tax on household rubbish. He said that he was interested in an idea suggested by Sir Michael Lyons, as part of his inquiry into local government finance, which involved a system of variable waste-charging.

The research institute said that a “pay as you throw” system was the only way of improving Britain’s poor record of recycling — which accounted for only 18 per cent of its municipal waste in 2003-04.

Greece and Portugal had the worst rates at 8 per cent and 3 per cent respectively.

Britain still fell far short of the next lowest nation, France, at 28 per cent.

The Netherlands, which was top of the league, recycled 65 per cent of its waste. Nick Pearce, the institute’s director, said: “Our European neighbours have shown that where charges are commonplace, recycling rates will rise.”

He acknowledged that the rubbish collection element of council tax bills would have to be removed if separate charges were introduced.

The bugged bins are said to have been introduced in parts of Cheshire, Cambridgeshire, Norfolk, Surrey and Wiltshire.

Council representatives said that the tags, which use radio frequency identification technology and cost about £2, would help them to collect information about waste disposal and settle ownership disputes over bins. They claimed that the tags could provide the “ability to charge waste producers based on the number of collections”.

A spokeswoman for the Department for Environment, Food and Rural Affairs said that local authorities had not been told to start using the tags.

She added that the Government was looking at several options to help Britain to meet tough European targets on landfill reduction.

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