A government announcement today that it is scrapping plans to penalise householders for not recycling scores eight out of ten for effort – but it may not go far enough to appease the civil liberties lobby.

Your bins will still be microchipped, and - whether you like it or not - your household waste habits will still be recorded centrally.

The big change, reported in national media today, is from a scheme to reward good recyclers and punish the bad ones, which the last government attempted to pilot last year. These plans stalled, when no councils could be found that were prepared to sign up to a pilot.

Instead, the coalition intends to put in place a scheme to reward those virtuous householders who recycle a significant amount of their waste. The new approach is mostly "carrot", as opposed to "carrot and stick".

Recently appointed Communities Secretary Eric Pickles explained that the coalition backs rewarding people for recycling. Various reports trotted out the good news from Windsor and Maidenhead, where a reward-based pilot was recently declared a success.

According to local councillor Liam Maxwell, the Windsor scheme "increases recycling rates, reduces our environmental impact, reduces council tax and helps local businesses".

The fly in the ointment – or possibly hovering round a nearby waste storage receptacle - is that for such a scheme to work, bins will still have to be chipped. The reward scheme will be run on an "opt-in" basis, as opposed to being compulsory: but it is likely that councils will still have to collect data from all bins, and therefore all households, in order to select out data relevant to those who are opted in.

The alternative would require that data from those who had opted out of the scheme was identified – and filtered out – at the bin collection stage.

This aspect of the scheme may yet raise unwelcome data protection implications. Data does not need to contain name and address to be "personal": rather, it becomes personal as soon as it is possible to identify an individual by combining data sets held by the data processor.

The processing of "opted out" data – even to eliminate that data from future processing – may therefore constitute unfair processing within the terms of the Data Protection Act 1998 and, without primary legislation to permit this, councils should brace themselves for future challenges.

Alex Deane, Director of Big Brother Watch, is well aware of this aspect of the scheme. He told us: "It’s good that bin taxes have been abandoned for now. They symbolised the worst of our Big Brother state - snooping on our private waste and charging us for the privilege.

"But these punitive and vindictive taxes were at least out in the open. Now exactly the same technology is being introduced, with the bribe of an 'incentive scheme'."

We have yet to receive a response from the Communities Department. ®