The Commons public accounts committee has warned that "urgent changes" are needed to the waste regulation system to stamp out abuses of licence exemptions by "unscrupulous operators".

The committee said that many potentially harmful waste sites are going unregulated at a time when Environment Agency inspectors are focussing too much on companies which operate well within the law.

"Waste represents a potential health risk and irresponsible handling of waste can cause adverse environmental effects such as pollution, litter, smells and unsightliness," said the report.

It added that the environment department needs to review the boundaries between exempt and licensed sites.

The MPs also called on ministers to simplify the licensing of sites posing an intermediate level of risk.

"In 2001/02, significant pollution incidents occurred at less than three per cent of licensed waste sites," said committee chairman Edward Leigh.

"The agency is, though, making far too many routine inspections and should target its work on the riskiest sites, where the operators' own compliance regimes are weak.

"Worryingly there is considerable evidence that activities currently exempt from a licence pose significant risks to the environment, and exemptions are being abused by unscrupulous operators.

"Urgent changes to the regulation system are needed to stamp this out.

"The department must also make it clear that operators with convictions or a poor record have to demonstrate clear remedial action before they are allowed to continue or expand their business."