Householders who recycle and compost their rubbish could see cuts in their council tax bills under plans being looked at by the Government.

It is considering allowing local authorities to set up pilot incentive schemes which would encourage residents to recycle rather than dump their waste.

The proposals were revealed yesterday by Environment Minister Margaret Beckett as the Government looks at ways to tackle Britain's spiralling waste problems.

However, it has ruled out a controversial national tax on household waste and is no longer considering punishing residents who do not recycle.

A report by the Cabinet Office Strategy Unit last November suggested a shift towards "incentives and rewards" for those who recycled rather than penalties for those who do not.

The "Waste not, want not" report set a raft of targets aimed at boosting recycling and cutting household waste.

Key targets included cutting the amount of biodegradable waste sent to landfill sites, with Britain's waste continuing to rise at three per cent faster per year than other countries.

A spokesman for the Department for Environment, Food and Rural Affairs said its incentive scheme was still very much at the proposal stage and it was important to examine the practicalities of handling such a scheme and any disadvantages that it may bring.

He said: ''Schemes involving direct or variable charging would require new legislation.

"The Government considers that further work is needed before any decision is taken on whether to extend the powers of local authorities and introduce pilot schemes.''