A company shortlisted for a lucrative council waste contract has spent more than

£2 million in East Sussex and Brighton and Hove through the landfill tax.

Viridor Waste Management has given £2.07 million-worth of landfill tax credits to projects inside the boundaries of the two local authorities in the last four years.

Nearly £1 million has gone towards a county council supported scheme to open a youth hostel and outdoor pursuits centre in the Ouse Valley.

Brighton and Hove Council-owned Stanmer House has received £50,000 while another £51,000 is being spent on a study of future waste strategy by the University of Brighton.

The landfill tax, billed as Britain's first green tax, was set up by then Tory Environment Secretary John Gummer in 1996 to try to curb the amount of waste going to landfill.

Waste companies can avoid paying 20 per cent of the tax by giving credits to specially created environmental bodies to tackle community, conservation and recycling projects.

But critics of the scheme say it is poorly regulated, has led to further destruction of the countryside and been hijacked by the waste industry.

Viridor, which operates the huge Beddingham landfill site, is one of six companies named this week on the shortlist for East Sussex County Council and Brighton Hove Council's controversial waste contract, worth an estimated £1 billion over 20 years.

The successful contractor will be responsible for collecting and disposing of waste and the two councils are pressing ahead with tendering, despite being unable to agree on the plans themselves.

Among projects and organisations that have received or been allocated tax credits from Viridor are:

l £935,927 towards a proposed youth hostel and outdoor pursuits centre at Itford Farm, near Southease.

l £437,250 to the Brighton Environmental Body, established by the University of Brighton.

l £200,000 to the Charleston Trust for improvements at Charleston House and Museum.

l £146,642 for the Hillcrest Community Centre, in Newhaven.

l £100,000 for restoration work at St. Andrew's Church, Beddingham.

l £50,000 to the Stanmer House Preservation Trust.

l £32,782 towards community facilities and new heating at Western Road Primary School, Lewes.

Senior Brighton and Hove councillor John Ballance, who is responsible for his council's side of the plans, said landfill tax credits spent in the area would not influence which company wins the waste contract.