Under new guidelines to relax the rules governing the disposal of carcasses, the Ministry of Agriculture, Fisheries and Food has told Britain's waste industry that it must use landfill sites across the country to dispose of cattle which might be infected with bovine spongiform encephalopathy (BSE).

As the Government battled yesterday to stop a political backlash over its handling of the issue, representatives of companies that operate landfill sites demanded 'unlimited indemnity' from the Government in case the infective prion which causes BSE in cattle escapes and causes human variant Creutzfeldt-Jakob disease in humans.

The companies fear they will be liable to law suits running into billions of pounds if the source of any new outbreak of human variant CJD is traced back to them. 'It would be a public health disaster,' said one senior source in the industry.

The move reveals the increasing concern over the public health implications of burying and burning hundreds of thousands of animal carcasses. On Friday the Government abandoned the burying of thousands of cattle at Hallburn aerodrome in Cumbria after locals complained of choking smoke, and grease-laden ash covering their houses.

The Government's Cobra task force met in emergency session yesterday and officials launched a rearguard action to stop the slaughter policy spiralling out of control. On Friday Agriculture Minister Nick Brown admitted that the Government was being overwhelmed by the number of livestock which needed to be slaughtered and then disposed of. Yesterday figures revealed that 408,000 carcasses were lying in fields waiting to be buried or burnt, and that more than 500,000 were awaiting slaughter.

William Hague, the leader of the Opposition, said that it was time for the Army to be put in operational control of the epidemic as Maff was clearly failing to cope. 'The speed of the slaughter process still needs to be speeded up further,' he said. 'In about 40 per cent of foot and mouth outbreaks, the animals aren't being slaughtered within 24 hours.'

But a letter obtained by The Observer, written by one of Britain's leading experts on waste disposal, reveals high levels of concern about the public health implications of the new policy.

The letter, written by Dirk Hazell, head of the Environmental Services Association which represents landfill companies, says: 'We are extremely concerned at any pressure exerted on our members to receive carcasses of cattle at landfill.

'Until the outbreak of foot and mouth disease, cattle carcasses over 30 months old were being sent to prescribed outlets (high temperature incineration). We are extremely concerned as to the known resilience and potential toxicity of the BSE prion. The high risk associated with the prion means that much greater caution must be exercised than with the foot and mouth virus which is much less resilient and does not damage human health.

'The order of magnitude in the difference between the prion and the virus is similar to that between Alzheimer's disease and athlete's foot.

'It was not considered safe before the outbreak to landfill carcasses of cattle aged between 30 months and 60 months and we must emphatically insist that our members must have a watertight, permanent and comprehensive indemnity.'

In Northern Ireland a cull of 4,000 cattle was ordered after the province suffered its second case of foot and mouth disease, six weeks after the first case and several weeks after Government controls were supposed to have halted the spread of the disease to new areas.

Northern Ireland Agriculture Minister, Brid Rodgers, confirmed that an emergency meeting of the Northern Ireland Executive would be held tomorrow to discuss the fresh outbreak. 'It goes without saying that this is a huge setback for our agriculture industry,' he said.

The outbreak, on a farm in Ardboe, Co Tyrone, reveals that the disease can lie dormant for weeks, or that it can be carried on the wind across large distances from the British mainland.