Labour-controlled Great Yarmouth is alone among England's 366 councils in refusing to prepare a plan. It has a budget of pounds 10m but says it cannot afford the pounds 10,000 it would cost.
The council claims the Government's recycling policy is 'grandiose' but ineffective.
David Maclean, the environment minister, has written to Great Yarmouth threatening to invoke compulsory powers under the 1990 Environmental Protection Act. It would be the first case of its kind.
However, the dispute has highlighted long-standing doubts about the Government's target of recycling 25 per cent of household waste by 2000: the current figure is less than 5 per cent.
Great Yarmouth yesterday received qualified support from both the Association of District Councils and Friends of the Earth.
Critics argue that the target will not be achieved without more intervention and tougher market controls. The collapse in the market for waste products has often led to glass and paper collected for recycling being dumped eventually in rubbish tips.
Great Yarmouth already operates schemes to recycle paper, bottles, cans and engine oil, and is examining plastics and rags. However, it decided a recycling plan was less important than services such as street cleaning, litter zones and dog wardens. For pounds 10,000, for example, it could employ another dog warden.
Barbara Baughan, chairman of the council's environmental health committee, said a full recycling programme would cost an estimated pounds 250,000 a year: this was 'unreal' in an era of financial cuts. 'Most local authorities which have done a plan find that the financial implications would be crippling,' she said. 'It's all very well having glossy brochures and objectives but you must have the political will to achieve them. The Government is still refusing to finance it properly.'
Great Yarmouth, which has its spending charge-capped, says it will be 3 per cent worse off next year because of cuts in its central grant. Despite being Britain's third biggest resort, it was forced to close seafront public toilets last year.
John Cannell, the council's leader, said members were 'absolutely disgusted' with the Government's position. He added: 'The Government is speaking with a forked tongue. It is paying lip service to the environment. It is taking money away from local government but asking us to spend more.'