The first trial of microchips in bins was a disaster and has been scrapped, it was revealed yesterday.

In a devastating blow to Whitehall plans for pay-as-you-throw taxes, the scheme was sunk by computer failings, residents' anger at increased surveillance and a 250 per cent jump in fly-tipping.

The trial covered 52,000 households and put £25,000 of scanning technology on each of 12 refuse lorries.

A combination of faults has led to a scheme to microchip bins being scrapped

But electrical, mechanical, hydraulic and data faults meant lorries and computer equipment repeatedly broke down, forcing binmen to carry out running repairs or override the system to carry on with their rounds.

The microchip was supposed to work by sending details of the weight of the bin and the address it was from to the lorry's on-board computer.

Each bin was weighed six times as it was lifted up and six times on the way down to ensure accuracy.

The billing information for each address was then downloaded to a database each week.

But John Fuller, the leader of South Norfolk District Council, which began the trial in 2005, said yesterday: 'The technology just didn't work.

'If you want to base a tax system on it, it has to work in every bin, in every street on every day of the year. Otherwise the figures are nonsense.'

The equipment is now being stripped out of South Norfolk's fleet of orange dustcarts – although the German-made microchips will remain in the bins.

Mr Fuller added: 'We pay our binmen to collect the refuse and recycling, not to act as Government tax collectors.

'Chip-in-bin is now proven to be another failed Government IT project that puts another hole in the database state.'

The failure raises grave concerns about pay-as-you-throw when the technology that could see families paying more for bin collections is so unreliable.

A Government report has already revealed 'significant difficulties' with bin weighing technology in three other councils.

Despite the concerns, one in five bins is now fitted with a chip and the Department for Environment, Food and Rural Affairs is looking for five more councils for further trials next spring.

But Mr Fuller had this warning. 'Those local authorities really want to have a word with us to save a lot of wasted effort.'

When the Conservatives came to power last year they decided to scrap the project. Councillor David Bills saw the extent of the problems at first hand after joining a bin crew.

He said: 'This added to our resolve to put an immediate stop to it, knowing that it would also reassure our residents.

'The whole concept of pay-as-you- throw is fraught with problems. It is, yet again, the Government threatening people with a new tax rather than encouraging recycling.'

The Daily Mail's Great Bin Revolt campaign has highlighted the depth of public anger over cuts to traditional rubbish collections.

The council paid for the scheme using Government grants of more than £1 million but the Department for Environment, Food and Rural Affairs (Defra) stressed that it was not a pilot scheme and the council had chosen how to spend the grant.

'They were given Government grants to expand their recycling service and they choose with their own free will how to use it,' a Defra spokeswoman said.

'If something doesn't work for a local authority, we think it's right for them to drop it. Systems don't work equally everywhere.

'They wanted to try it and they decided to stop it. That's their decision.'

She added: "We haven't even passed the legislation to enable pilots to take place.

'The earliest pilots will start is April next year, after legislation is passed and authorities are asked to come forward.'

She said five pilot areas will be chosen.

'Pilot schemes to create incentives for recycling will be undertaken by five local authorities next year, when current legislation is updated to make this possible.

'Councils wishing to participate will propose schemes and methods that they have devised, not us. 

'We will evaluate the impact of those pilots before making a final decision on whether other local authorities can introduce similar schemes.'

The spokeswoman added that South Norfolk Council's criticism of the technology will not affect the proposed pilot schemes.

'Every set of circumstances is different. We can't expect the same thing to work everywhere,' she said.

Tory local government spokesman Eric Pickles accused Labour of being 'caught red-handed trying to dupe people into thinking their bin tax will work'.

He added: 'Bin chips will not only force up bills at a time when people are struggling to make ends meet as the cost of living goes through the roof, but they are also an invasion of people's privacy.'

South Norfolk's trial was paid for with £1.2million from the Government to the then Liberal Democrat administration.

Of the 350 local authorities in England, 169 have axed weekly collections.

Pay-as-you-throw has added to the backlash. While the Government claims some homes will pay less, research has revealed many could end up paying £466 extra each year.

The introduction of microchips has also proved deeply unpopular. In 2006, it was reported that 25,000 had been removed by residents in Bournemouth.

A spokesman for the Department for Environment, Food and Rural Affairs, said: 'It is for local authorities to make decisions about the best waste and recycling schemes for their area, based on local needs.

'Pilot schemes to create incentives for recycling will be undertaken by five local authorities next year, when current legislation is updated to make this possible.'

A 2006 report commissioned by Defra said 'significant difficulties have been experienced with individual bin weighing technology'.

The councils it named were South Norfolk, Hammersmith and Fulham, Lambeth and Leeds.

Envicomp, the firm that provided the bin weighing equipment to South Norfolk, said the technology had been in use in Europe since 1996.

A spokesman added: 'We are confident the technology does work and is reliable. However, like all vehicle equipment, it must have regular maintenance to guarantee the reliability.'