A tax scheme designed to encourage contributions to environmental projects has been criticised for a lack of transparency by a Labour-dominated committee of MPs.

Under the Landfill Tax Credits scheme, landfill site operators can claim up to 90 per cent of tax credits against the tax collected by Customs and Excise if they make a monetary contribution to an environmental project, such as changes to waste management.

However in its report published today, the public accounts committee warns that insufficient evaluation is made by the Treasury of the scheme or the projects that are funded by it.

The scheme has paid out more than £400 million, the report says.

Currently Entrust, which is a private company, regulates the tax credits.

But the firm can only revoke the enrolment of an environmental body or request regulation changes by Customs and Excise.

The committee calls for customs to give Entrust a greater number of sanctions - including suspension of bodies from involvement in new environmental projects.

Committee chairman Edward Leigh said: "We have concerns about the operation of this scheme on several levels.

"Although environmental bodies have now received over £400 million there is a real dearth of information on what has been achieved.

"More generally, the lack of accountability needs to be addressed by giving one department clear overall responsibility, and Entrust cannot do its job effectively unless it has a better range of sanctions to impose."