The policies of Tony Blair and Gordon Brown have helped to generate a spiritual, civic and economic crisis in Britain, according to an important Church of England report.

Labour is failing society and lacks the vision to restore a sense of British identity, the report says in the Church’s strongest attack on the Government for decades. It accuses the Government of “deep religious illiteracy” and of having “no convincing moral direction”.

The report, commissioned for the Church of England and to be published on Monday, accuses the Government of discriminating against the Christian Churches in favour of other faiths, including Islam. It calls for the appointment of a “Minister for Religion”, who would act as the Prime Minister’s personal “faith envoy” and who would recognise the contribution of faith communities to Britain across every government department.

The 180-page report, seen by The Times,describes the Government as moral, but lacking a “compass” and reflects an attempt by the Church to carve out an effective role for itself in the 21st century as a provider of welfare for young and old.

The report was commissioned by the Bishop of Hulme, the Right Rev Stephen Lowe, Bishop for Urban Life and Health, with the support of the archbishops of Canterbury and York, Dr Rowan Williams and Dr John Sentamu.

The report comes only days after Dr Sentamu accused Mr Brown of sacrificing liberty for misguided notions of equality and of betraying new Labour’s mantra of “rights and responsibilities”. It shows the extent to which church leaders feel betrayed by the Government’s embrace of a secular agenda.

The authors find evidence of deep-seated hostility to the Church in particular, excluding it from important areas of policy and research – despite Mr Blair being one of the most devout prime ministers of the past century. They portray a Government committed to research into Muslim communities but barely interested in Christian involvement in Britain’s civic and charitable life.

This is in spite of what the authors describe as centuries of pioneering work by the Church in areas of welfare and social provision. “We encountered on the part of the Government a significant lack of understanding or interest in the Church of England’s current or potential contribution in the public sphere,” the report says.

Academics from the Von Hugel Institute at St Edmund’s College, Cambridge, approached every Church of England bishop as well as more than 250 MPs, peers and academics. About 70 of the 106 diocesan and suffragan bishops responded. “Every participant in our study from the Church agreed that there was a deep ‘religious illiteracy’ on the part of the Government, especially on the local level, and that an increased tendency to centralised, mega-contracts in some government departments was bad for the whole of the voluntary sector,” they write.

In its strength of feeling it echoes the Faith in the City report of 1985, condemned by one government mininster as “Marxist” because of its criticism of the effects of Thatcherism on Britain’s inner cities. But, far from being a left-wing attack on a Conservative administration, this Church report found many of David Cameron’s policies to be more worthy of praise.

Outlining evidence of huge fault-lines in the relations between Church and state, they write: “The Government is planning blind and has no convincing moral direction.”

They set out recommendations designed to put the Church back at the heart of social and welfare provision, for funds to research the role of “theology” and “spirituality” as motivations in charity organisations and for the archbishops of Canterbury and York to set up a “Anglican Philanthropy Fund” to cash in on a new generation of potential donors.

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