Cheshire East Council is to set up its own company to collect and sort domestic rubbish.

The firm will remain entirely owned and run by the council, which will still employ all the staff. But council bosses say it will create greater efficiency.

Officers had recommended that bin collections be tendered out to a private firm, but this option has been scrapped following a review.

Instead, a wholly owned company is to be established which council chiefs say will minimise disruption to residents’ collections.

They also say it will give them greater flexibility on employment terms as well as allowing them to divert more waste to greener forms of disposal.

The council’s cabinet has approved the formation of the company shell and has asked officers to come up with a business plan by October. A total of £1.9m of savings by 2015 have already been identified, including replacing 20 contract hired waste vehicles with ones purchased by the council.

The council’s waste service has more than 220 full-time staff and costs around £22m a year to run.

The news has been welcomed by union leaders, who were opposed to the service’s privatisation.

Mark Stevens, from the GMB Union said: “We are glad it is being kept in-house rather than being outsourced, which we were against.”

Michael Jones, council leader, said: “We could have chosen to outsource but it doesn’t motivate staff and our bin men are fantastic.

“They always go out of their way and look out for vulnerable residents.”