A 25p levy on disposable coffee cups being debated by MPs could be used to pay for improved recycling facilities.

The environmental audit committee says all disposable cups should be recycled by 2023 – and they should be banned if the target is not met.

It is calling on the government to introduce a 25p charge on disposable cups on top of the price of a hot drink – nicknamed the “latte levy” – with money raised used to improve the UK’s reprocessing facilities to ensure cups and other food and drink packaging is recycled.

Shops such as Pret A Manger already give discounts to people who use reusable cups, but the committee argued that customers would be more receptive to a charge, based on the success of the 5p single-use plastic bag levy.

The UK throws away 2.5 billion disposable coffee cups every year. Almost all of them are incinerated, exported or sent to landfill because their plastic lining makes them costly to recycle.

The committee heard that less than 1% of coffee cups are recycled because there are only three facilities in the UK that can split the paper and plastic components.

It is also calling on the government to set fees for producers who make packaging that is difficult to recycle.

Committee chairwoman Mary Creagh said: “The UK throws away 2.5 billion disposable coffee cups every year, enough to circle the planet five-and-a-half times.

“Almost none are recycled and half-a-million a day are littered.

“Coffee cup producers and distributors have not taken action to rectify this and government has sat on its hands.

“The UK’s coffee shop market is expanding rapidly, so we need to kick-start a revolution in recycling.

She added: “Coffee shops have been pulling the wool over customers’ eyes, telling us their cups can be recycled when less than 1% are.

“It is only right that producers should bear more of the financial burden to help recycle their packaging, so my committee is calling for producer responsibility reform that rewards businesses that use sustainable packaging and makes those that don’t face higher charges.”

A Department for Environment, Food and Rural Affairs spokesman said: “We are encouraged by industry action to increase the recycling of paper cups with some major retail chains now offering discounts to customers with reusable cups.

“We will carefully consider the committee’s recommendations and respond shortly.”