Contractual arrangements could “have advantages in the effective delivery of national priorities,” it said.

The report, written by Sir Michael Lyons, said strong local accountability would improve local authority performance. But he warned that councillors were unrepresentative, poorly rewarded and under-valued, and that this must change if accountability is to be achieved. Public trust and confidence in local government must also be improved.

He said greater clarity was needed about the roles of central and local government, and how they work together. He recommended all future requirements placed on councils from the centre should be adequately funded.

National prosperity, local choice and civic engagement: a new partnership between central and local government for the 21st century can be found at www.lyonsinquiry.org.uk