Worcestershire County Council has been accused of snubbing a recycling company in order to forge a "state monopoly".

Mid-Worcestershire MP Peter Luff has complained to audit watchdogs and the Government about the way the council treats Betta Bedding.

The firm collects newspapers in Worcester and shreds them. Some paper is used to line racehorses' stables, so the animals are not tempted to eat the material and put on weight. The rest is sent for pulping.

Offenham-based Betta Bedding processes 10,000 tons of paper each year and employs 17 staff, but has not been allowed to claim recycling tax credits.

The county council - which can authorise credits - says Betta Bedding should buy newsprint from Severn Waste Services, which will collect materials for recycling by the start of 2002.

"This puts Betta Bedding at the mercy of one supplier and creates a state monopoly," said an angry Mr Luff.

"I've written to the Audit Commission and the Department of the Environment, but I'm very disappointed. They've given me the brush-off."

Mr Luff said the Audit Commission had agreed to "look at" the issue when it next held a Best Value Review, while Ministers had backed Worcestershire County Council.

The Government was happy with the authority's actions because Severn Waste Services was a private operator rather than an arm of local government.

Nik Spencer, the owner of Betta Bedding, shared Mr Luff's concerns.

But negotiations were continuing with both Worcestershire County Council and Severn Waste Services, he added.

"We're prepared to buy paper from Severn Waste Services, but on our terms," he said.

"We want to buy all the paper they collect in Worcestershire and Herefordshire and to have a contract that runs for a minimum of 10 years."

No one was available for comment from Severn Waste Services.

A spokeswoman for Worcestershire County Council said having just one collector of waste materials would be more practical for householders.