Hundreds of thousands of cars could be dumped on Britain's streets because of punitive Treasury charges, the government has been warned.

The Institute for European Environmental Policy says that 250,000 more vehicles will be abandoned each year because of a decision to make the poorest motorists pay for the disposal of their old cars.

The bill for clearing up the mess will be left with local councils as drivers opt to dump their cars instead of paying for them to be disposed of, the pressure group said.

A new European directive insists that cars reaching the end of their lives must be recycled and have environmentally damaging materials removed.

The Treasury plans to implement the law by insisting that the final owners of the cars, typically the poorest group of drivers, pay the disposal costs of up to £100.

The institute says that the cost should be shared among motorists by an across-the-board increase in vehicle excise duty of £5 each year.

Lib Dem MEP Chris Davies, who helped draft the law, says the Treasury will simply be passing on a bill of tens of millions of pounds to local authorities.

"Two million cars are scrapped each year and this is a good law intended to encourage recycling and curb pollution," he said.

"Yet Britain is set to shoot itself in the foot once again by making a pig's ear of its application.

"The Treasury seems determined to ensure that the maximum problems and expense are caused for local councils and local communities. These will all be completely unnecessary."

The institute said that unless changes were made to the government's proposals, the increasing number of dumped or burned out cars will encourage crime and make the poorest communities less attractive places in which to live.

Government sources have said the risk of being prosecuted for abandoning a vehicle is "negligible".

Vehicle dismantlers have also claimed that many drivers will report the spurious theft of abandoned vehicles as a means of escaping disposal fees, increasing crime figures without convictions.