George Osborne warned of fly-tipping chaos as 'skip tax' gets messy

Chancellor hit by new Budget row over proposals to increase cost of dumping waste

Britain faces a nationwide epidemic of fly-tipping and thousands of jobs will be lost because of a massive increase in charges to dump rubbish, waste companies warned last night as George Osborne was hit by a new tax row.

They also forecast that skips full of rubble would go uncollected around the country after an increase of nearly 2,500 per cent in the tax for dumping some types of rubbish in landfill sites.

Waste firms have already staged an impromptu protest in Parliament Square over the move. Today, they will ask the Chancellor to reverse the "skip tax".

The storm has arisen after the HM Revenue and Customs (HMRC), which is overseen by the Treasury, spelt out tax rates which will see the amount charged for dumping some waste materials soar from £2.50 to £64 a tonne.

The HMRC said last night it had merely acted because landfill sites were charging waste firms the wrong rates.

But the skip disposal industry, which employs between 20,000 and 30,000 people, says it will now cost £300 to empty a typical skip, compared with £144 before last week's tax rise.

Companies warn they will no longer be able to afford to remove the thousands of skips currently lining Britain's streets as they charge an average of £170-£180 to hire one. They also argue that the crisis will undermine building firms' efforts to emerge from recession.

Jon Tapping, who runs a skip hire firm in Mitcham, south London, said more than 50 of his 75 skips were hired out, but he would be heavily out of pocket if he collected them.

Days after the move was announced, drivers from waste firms blocked Parliament Square and are considering a blockade of 1,000 skips in London over Jubilee weekend. They will today hold a protest meeting in the House of Commons to which they have invited Treasury ministers to defend the move.

The Labour MP Siobhain McDonagh, who has organised the meeting, said: "How can the HMRC do this to small business at a time of recession?"

An HMRC spokesman said: "HMRC responded to concerns expressed by landfill operators that some companies were not paying the right rate of tax and in the process disadvantaging those who paid the correct rate. We have addressed this anomaly by issuing fresh guidance to ensure a level playing field."

Fines for bin collection errors reduced

Fines for families who make mistakes over putting their bins out for collection were reduced from yesterday.

Previously, residents could have been fined up to £110 for overfilling their bins or leaving them out at the wrong time. The fixed penalties councils can levy have been cut by the Government from £75-£110 to £60-£80, with fines reduced to as little as £40 for people who pay early.

Caroline Spelman, the Environment Secretary, said the change was a "step towards a return to common sense". But the Local Government Association said: "Fines are only ever issued as an absolute last resort."