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Caerphilly County Borough Council could be slapped with £2 million in fines each year if residents fail to improve their recycling rates.

The area has “historically performed well” but the recycling rate has “declined” over the past three years, leaving the council at risk of “significant financial penalties”, Chris Morgan, the cabinet member for waste, warned this week.

The Welsh Government currently requires councils to recycle 64% of waste, a figure that will rise to 70% next year.

The council’s cabinet this week approved a “route map” for drastically improving the area’s recycling, as well as a number of “early interventions” – such as providing free food waste bags to residents – designed to keep fines at bay.

Caerphilly is currently the only one of Wales’ 22 local authorities which doesn’t give out bags for food caddies, and the area’s participation rates for recycling food waste are “less than 50%”, Marcus Lloyd, the council’s head of infrastructure, said.

Residents reported feeling a “yuck factor” when dealing with food waste, he said, adding that he hoped the bags would give people more “confidence” to use their caddies rather than putting unwanted food in the bin.

The bags scheme will cost an estimated £255,000 over a year, and the council also expects to spend £52,000 on giving out extra food caddies if people respond well to the system.

Every 2.5% improvement in food waste recycling will save around £55,000 in tipping costs, Mr Lloyd said – meaning there would need to be a hefty 12.5% hike in performance before the council break even on the cost of the bags.

Council leader Sean Morgan acknowledged the authority was starting from a “very low base” with food recycling, and Mr Lloyd said he hoped the scheme would “pay for itself at some point in time”.

The council will also have to reduce its reliance on sending waste for incineration if it is to avoid Welsh Government fines. Whereas local authorities could dispose of 42% of waste in this way a few years ago, the government will cut this maximum to 30% next year.

But the cabinet rejected plans for a trial booking system at Trehir Civic Amenity Site, on the recommendation of council committee members who feared such a scheme could increase fly-tipping, encourage people to travel to other tips further afield, or potentially lead to the site being closed down.