Worcestershire County Council may be fined after failing to meet recycling targets.
And if the council's record does not improve in the next couple of years the Government could send a team of troubleshooters to take over the waste management system.
The council's website states that recycling levels will reach 26 per cent by mid-2001.
But the authority admitted this week that the information, based on its 1998 contract with waste processing firm FOCSA, is inaccurate. In fact, the figure is 10 per cent.
Judith Harper, the council's waste manager, blamed a failure to set up kerbside rubbish collections across the county, as well as delays to the Kidderminster incinerator project.
Planning permission for the Stourport Road incinerator has been rejected.
"There's no date fixed for the kerbside collection service to start, although it's begun in Wychavon," she said.
"We offered the districts the chance to do the service themselves or to let Severn Waste Services run it, but they're still in discussions.
"The incinerator at Kidderminster was to burn waste to generate electricity and feature a recycling facility."
The council would face landfill taxes as a result of having to bury more rubbish than anticipated, she said.
But she added some of the charges could be offset, because "recycling supplements" would not be paid to processing firms, due to the lack of progress on recycling.
"Our new targets are to recycle 20 per cent of the county's waste by the municipal year 2003-4 and 30 per cent by 2005-6," added Mrs Harper.
"If we don't achieve them, the Government could fine us or bring in external management to sort out the problem."
Worcestershire County Council has now given permission for Severn Waste Services to extend its recycling operations at the Hill and Moor landfill near Pinvin.
Herefordshire Council also signed the 25-year recycling contract with FOCSA, Severn Waste Services' parent company, three years ago.
Worcestershire and Herefordshire produce about 350,000 tons of rubbish each year.
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