Taxpayers are facing a multi-million-pound bill to store 100,000 tons of waste paper and cardboard as the British recycling industry plunges into crisis.

Rubbish carefully sorted by householders is piling up in vast warehouses as the market for waste paper collapses, and experts have warned that the mountain of garbage could double in the next three months.

Waste paper is now virtually unsellable, so the private firms contracted to deal with household rubbish have been forced to put it into storage, incurring huge bills.

Some companies have begun to claw back the cost from local authorities, prompting fears of hikes in council tax bills and raising the question of whether the ‘kerbside’ recycling, championed by environmentalists across the country, is economically viable.

Last night Steve Bell, of Recycling UK, revealed that none of Britain’s 80 paper mills is now accepting new stock – and warned that the situation is not expected to fully recover until 2010.