It is my first and last day at sewage school. The premises are nothing much to look at, consisting of a Portakabin in the car park of Barston, a small sewage-treatment works near Birmingham. This classroom is one of five run by Severn Trent, one of the 10 utilities that supply clean drinking water and remove dirty water for the people of England and Wales. The education programme is fully funded by the utility in an attempt to reveal its vital job to a public that doesn't pay it mind. They think it's a good investment.

Today's class comes from a nearby primary school. After a brief trot through the water cycle and some green lessons - washing a car with a hosepipe uses nine litres of water a minute, children, so use buckets - the sewage pupils put on their wellies for the tour. First, the influent, brown water rushing in from the sewers, visible through a hole in the ground. Then the compactor that crunches up objects screened by grills. It's not moving, sir, they say, but it is, spitting out in slow-motion rags and pen caps and hundreds of the yellow sweetcorn kernels that humans can't digest, prized by picnicking birds.

Wastewater treatment is much-tinkered-with - 1,000 works will have 999 different processes, a worker tells me - but the basics are unchangeable. Solids are removed from sewage first by filtering and letting them sink. This is primary treatment. Secondary treatment involves micro-organisms, bolstered by added oxygen, that break down any organic content still in the wastewater. The bacteria-cleaned effluent goes into a nearby stream. The children lean over obediently to look at its colour. It's clear! Not brown! And then it's time to make sewage soup.

It has been a long time since sewage consisted of pure human faecal material. Into sewage, anything goes. An enterprising American sewage-treatment manager once expressed this by producing water bottles supposedly made from sewage effluent. Their labels listed the ingredients: water, faecal matter, toilet paper, hair, lint, rancid grease, stomach acid and trace amounts of Pepto Bismol, chocolate, urine, body oils, dead skin, industrial chemicals (aluminium, copper, zinc, lead, chromium, nickel, molybdenum, selenium, silver, arsenic, mercury) ammonia, soil, laundry soap, bath soap, shaving cream, sweat, saliva, salt, sugar.

So the ingredients of sewage soup are a tankful of water and whatever else the class might have put down the sink, toilet, gutter or drain that day. The children suggest shampoo, soap, toothpaste, washing powder, rice and salt, which the teacher adds into a tankful of water. "Number one" is lime cordial. "Number two" is soggy Weetabix. The rest of the lesson involves filtering the filth out of the water, in an attempt to impart the difficulty - and dubious sanity - of the paradigm of waterborne waste treatment in modern industrialised societies, whereby you take clean drinking water, throw filth into it, then spend millions to clean it again. My team gets a passable liquid from the filtering. They are pleased. But no one has considered the stuff that's been filtered. No one mentions the sludge.

When sewage is cleaned and treated, the dirt that is removed is called sewage sludge. The UK produces 1.44m tonnes of it a year, and it has to go somewhere. The most common options consist of incineration, landfill, application to farmland and dumping at sea. The EU banned ocean dumping in 1998, as the nutrients in human waste - nitrogen and phosphorous, for a start - can, in great quantities, suffocate the life from water. The public doesn't much like incineration, and landfill space is running out. So 68% of our sludge is applied to fields, a fact that translated into newspaper headlines last month as "human sewage [is] used for our cereals," beside a photograph of a woman eating cornflakes. Reader reaction was predictable. One commenter swore never to shop at supermarkets again. Another pronounced the practice "disgusting".

But on the forum of Farmers Weekly, the farmers let rip. "It's great stuff," wrote one, "and probably better than the raw cow muck that goes on." The public's horror was yet another reason that "the general public, and the media, should not be allowed out on farms ... without serious education beforehand". In fact, sludge used as fertiliser isn't news. Nor is it going away, given the rising price of artificial fertilisers. Severn Trent reports a 25% increase in demand from farmers since January. Anglian Water has a waiting list. And why not? Sludge contains nitrogen and phosphorous, which farmers and crops love. It's often given away free, and it saves farmers about £450 per hectare that they would otherwise spend on fertiliser. Water UK, an association of the water utilities, reckons 3,000 farmers - out of 146,000 in total - use sludge each year, applying it to all kinds of arable land.

Nor is it unusual. Human waste has been used to fertilise fields for thousands of years. China's willingness to use untreated sewage on its fields is probably the reason its soil is still fertile after 4,000 years of cultivation, when other civilisations such as the Maya watched their crops wither and their soil erode. A recent report by the International Water Management Institute calculated that 200 million farmers worldwide were using raw sewage to irrigate their crops.

Properly treated, sewage could have a place in the nutrient cycle. Food feeds humans whose waste feeds food. And sludge is not raw sewage, which can carry at least 50 communicable diseases. It is treated and regulated (the better stuff has to have 99.9999% of pathogens, including salmonella, removed; the lower-quality sludge has to have 99%). Heavy metals are also regulated, as are harvesting and sowing times (farmers must wait 30 months before sowing vegetables after using lower-quality sludge, for example). In principle, it makes perfect sense. The British government considers sludge as fertiliser "the best practicable environmental option". Steve Ntifo of Water UK is convinced that sludge is safe "subject to regulation".

But in the US, where 3m tonnes of sludge are applied to farmland, an increasingly vocal anti-sludge movement doesn't agree. Though sludge has been rebranded "biosolids" (after a naming competition that also produced "bioslurp" and "black gold"), the debate over its use has become controversial and bitter. It has involved lawsuits, high politics, secret settlements and scores of allegations of illness. Some of those allegations have come from a quiet corner of North Carolina, from a picture-postcard small white bungalow opposite unremarkable brown fields. The house is owned by Nancy Holt, a retired nurse, whose family have farmed in this area for 250 years. The fields, Holt thinks, are killing her.

I visited Holt on a hot August day last year. She greeted me with a hug and a cold flannel for my head, then sat me down at the kitchen table and prepared the weapons of the grassroots protester: piles of files, dossiers, reports and a scientific vocabulary that she has accumulated along with frustration and disbelief. The year before, she told me, sludge was applied for 33 days straight to the fields. "Based on the number of 6,000-gallon tankers that came to apply it, we came up with the best guess that 9.75m gallons [were] spread on 160 acres. They were doing it 12 hours a day and a truck would arrive every 10 minutes." That was when Holt went blind. She wasn't a well woman to begin with. When I'd called to make the appointment, she'd apologised for misunderstanding something by saying, "I have holes in my head." I took it as a joke, but she does have holes in her head, after surgery which left her with metal clamps in her brain. One time when the sludge was applied - it's been arriving twice a year, spring and summer, for 13 years - the arteries in her brain swelled, pressed on her optic nerve and temporarily took away her sight. The diagnosis was the blood-vessel disorder, giant cell arteritis, but no cause was proven. Holt is sure the cause was the sludge, and she now spends much of her life trying to prove it.

The trouble began in the creeks. In 2001, Holt's grandson and great-nephew were diagnosed with staphylococcus aureus ("staph"), a bacterial infection usually associated with dirty hospitals, and most famous for its antibiotic-resistant superbug strain MRSA. She noticed that they fell sick after playing in the streams running behind the house. Then a local dog fell ill to flesh-eating bacteria. Then someone organised a fundraiser for a couple who both had cancer, and people started taking a tally of incidents. The Cook family: three daughters with breast cancer. The Hoffmans: a mother with colon cancer, a father with prostate cancer and a 13-year-old son with testicular cancer. Five cases of brain cancer in a community of 38 families. Holt started to keep records.

She made a list of health problems associated with exposure to applied sludge that included "increased respiratory distress or breathing difficulties; diarrhoea (chronic during sludge applications, all ages); chronic and acute headaches (persistent after exposure to odours, relieved by leaving residence); staph infections (children covered by staph sores after playing in creeks or streams after significant rains); presumed neurotoxin sensitivity (seizures, nausea, elevated blood pressure, and rash)."

In this, she wasn't alone. Another sludge activist called Helane Shields had compiled a dossier of complaints 500 pages thick. The Waste Management Institute at Cornell University, directed by Professor Ellen Harrison, has gathered 350 sludge-related health complaints, and lists characteristic symptoms as: asthma, flu-like symptoms, eye irritations, lesions, immuno-deficiency, nosebleeds, burning eyes, throat or nose.

Nancy began to read the literature, including news stories about the work of Dr Tyrone Hayes, who found that frogs were being deformed by mixtures of pesticides, even when individual pesticides were well within legal limits. She handed me articles about the transmission of prions - infectious agents linked to BSE - from funeral-home waste, and about outbreaks of e-coli in Californian spinach. She talked at top speed about antibiotics in the sewage, and how only the strongest and fittest survive and that if we wanted to create superbugs, we couldn't do better. She didn't let up for two hours, and by the end was still running on indignation.

People who promote and supply biosolids, depending on how courteous they are, tend to dismiss opponents such as Holt as anything from over-emotive to hysterical. Cranks. Nimbyists. The problem, they say, is about smell, not science. Humans have learned to avoid what is dangerous, and faeces can be lethal. Faecal aversion, one wastewater treatment manager told me, is clouding risk perception. He showed me a bottle of vitamins which contained the heavy metal selenium. "You'd have to eat 212 pounds of our biosolids to get what your body needs."

But criticism of sludge has come from quarters that no one could call over-emotive. Robert Swank, a senior Environmental Protection Agency official, testified to the US Senate in 2000 that US regulations "don't pass scientific muster". In 2002, a senior EPA microbiologist called Dr David Lewis led a University of Georgia study that analysed 53 incidents where health issues had been reported near sludge sites, and found a puzzlingly high incidence of staph infections. Lewis thought chemical irritants in sludge may be causing lesions that allowed staph easy access to the bloodstream. He told reporters: "In my opinion, the land-spreading of sludge is a serious problem. We have mixed together pathogens with a wide variety of chemicals that are known to enhance the infection process. It makes people more susceptible to infections." Taking excrement from hundreds of thousands of people, mixing it and spreading it on land is simply "not a good idea". Not long afterwards, he was fired.

The Harper-Collins Dictionary of Environmental Science defines sludge as "a viscous, semi-solid mixture of bacteria and virus-laden organic matter, toxic metals, synthetic organic chemicals and settled solids removed from domestic industrial wastewater at a sewage-treatment plant". The Clean Water Act keeps it simple and calls it a pollutant. Critics don't just object to possible risks to human health: Ellen Harrison of Cornell University, a soil scientist by training, also worries about the health of soil. In a paper entitled "The Case for Caution", she pointed out that "lead used by Romans persists in the soil two millennia later".

Of course soil science is extremely complex, and long-term tests run by Defra looking at metals in sludge-applied land have found no cause for concern. Even so, Switzerland - which used to land-apply 40% of its sludge - has banned the practice because of fears from farmers that it was harming their soil. The Netherlands has banned agricultural use of sludge, and national farmers' associations in France, Germany, Sweden, Luxembourg and Finland are against it, partly because of concerns about organic contaminants such as PCBs and brominated flame retardants (linked to liver and neurodevelopmental toxicity and hormone disruption), which some research has shown persist in sludge.

Food retailers Del Monte, Kraft and Heinz won't accept produce grown on sludge-fertilised fields. EU organic regulations - which are followed by all UK organic certification bodies - won't allow it, even though the principle of closing the nutrient cycle is one that is dear to organic hearts.

Ntifo attributes the Swiss ban to "a powerful incineration lobby". Opposition from food retailers, meanwhile, is about "a perception of perceptions". Food retailers worry what their customers think. "They are calculating their commercial risk. It's not about the science." Water UK states that "there has never been a recorded outbreak of human ill health in the UK as a result of the practice of recycling biosolids to land."

I don't know who is right. But I see the certainty of the sludge industry, and I think of a different century when engineering and science began to have inordinate confidence, which was expressed by Sir Joseph Bazalgette during an 1870 inquiry into the pollution of the Thames. The vicar of Barking and 123 of his neighbours had objected to Bazalgette's practice of discharging all London's sewage into the river. Bazalgette, called to the inquiry, showed himself to be as sure of himself as the biosolids promoters of today. The possibility that the river was being polluted was, he asserted, "entirely imaginary and contrary to the fact". Eight years later, the Princess Alice steamboat collided with a dredger near the outfall, and more than 600 people died. Survivors reported that they could not swim in such noxious waters, and that they vomited copiously. The outfalls were closed 20 years later. It is not recorded whether Bazalgette ever admitted he had been wrong.

PCBs were considered safe for decades. So was DDT. In the US, the most authoritative document on sludge is still a 2002 report by the National Academy of Sciences, which concluded that "there is no documented scientific evidence that the Part 503 rules [which govern biosolids use] have failed to protect public health". But opponents quote the following sentence instead because it reads: "However, additional scientific work is needed to reduce persistent uncertainty about the potential for adverse human health effects from exposure to biosolids." The sentences are quoted endlessly because, in Harrison's view, "there is a dearth of investigation in this area". Those two sentences are the scraps that each side fights the other over. In between, there is space for speculation and fear.

In the US, the fate of the biosolids industry may be decided by lawyers. Though three deaths of young men allegedly from sludge-linked staph infections didn't reach court (one was settled by Synagro, a sludge-applying giant now owned by the Carlyle Group), those of cows have. In 2006, a Georgia court awarded damages to a dairy farmer when 30% of his cattle died after eating sludge-applied hay, 10 times the normal mortality rate. An Associated Press investigation found that levels of thallium - a metal that can cause nerve damage - in the herd's milk were 120 times those allowed in drinking water (and that the milk was still sold for human consumption). This year, Judge Anthony Alaimo of Georgia found that another dairy farm had been acutely contaminated by sludge. Scientific data supplied by the municipality of Augusta that claimed to prove the safety of biosolids was, the judge declared, "unreliable, incomplete and in some cases fudged".

Are biosolids safe? "I am always hesitant to answer that," says Eric Davis, the land application manager for Burlington, North Carolina, which supplies the biosolids that are spread on the fields near Holt, "because safe means something to some folks and something else to others. That doesn't mean we're trying to hide anything. If safety means compliance with the letter of the law, then our biosolids are safe. There are a finite number of constituents we can test for: outside those, you're in the realm of unknowns. We're always trying to figure out the next step. We're willing to change as technology changes."

This wouldn't comfort the lone voice of opposition on the Farmers Weekly forum. Though in the minority, he was forthright. "I won't have sludge on my land. The heavy metals just sit in the plough layer waiting until someone realises there are long-term problems for animals, crops and us. I honestly believe that all those who [use sludge] will live to regret it."

• Rose George is the author of The Big Necessity: Adventures in the World of Human Waste, published by Portobello Books on Monday priced £12.99

· This article was amended on Wednesday October 22 2008. Nancy Holt lives in North Carolina rather than South Carolina as we originally said in the article above. This has been corrected.