A third concern was raised over aspects of the present state of the contracting process in the outsourcing of welfare and other social services. Some respondents felt that the system was over-centralised in many state departments and Local Authorities. It was also, they felt, "too much driven by cash and not by principles and the needs of people, and not pro-poor enough", according to Davis, and failed to take into consideration the multiplicity of needs when allocating funds, the report also found.
"In that sense the state is meaning well, it is principled, it has good intentions," Davis told journalists, "but it doesn't have a compass by which to direct itself because it doesn't have the evidence to ground its reflection."
The report also warns that the Government is focusing consciously on "minority religions" such as Islam.
It makes a number of recommendations, including the introduction of new legislation to "create a level playing field for faith-based agencies seeking to engage in public service reform, contracting and civic action". It also recommends the establishment of a new Minister for Religion, Social Cohesion and Voluntary Action.
Such a minister would help improve evidence gathering and coordination of policy so that people of faith "become part of a process which is about religion, social cohesion and voluntary action and not compartmentalised into the parts of government which are rightly having to deal with the struggles of radicalisation", Davis said.
The Archbishop of Canterbury, Dr Rowan Williams, and the Archbishop of York, Dr John Sentamu, said in a joint response that the report painted "a general picture of committed social engagement which if grasped imaginatively by the state could, indeed would, yield some extraordinarily positive results".
They added, "On the other hand it reveals a depressing level of misunderstanding of the scale and quality of contribution faith-based organisations make to the civil and civic life of our nation - our common good."
The Archbishops said that the report's recommendations would need serious consideration, a point echoed by Bishop Lowe who said he expected a very wide debate on the report within the Church.
At the launch, Bishop Lowe welcomed the positive light that the report had cast on the Church.
"I don't think the Church is very good at actually selling itself," he said. "In fact we spend a lot of time bemoaning the fact that people say we are declining without recognising the immense contribution we make as the largest voluntary organisation in the country. That sense of our activity is often, I would almost say always, forgotten."
He said that the Church of England had to equip itself in order to take on a greater role and challenged the Government to be clear about its intentions to partner with the Church in welfare provision.
The Bishop remained positive about the Church's future role.
"I hope and believe that the Church will be popular because it offers a care not based on profit but based on the concern for body, mind, and spirit...a holistic approach to the way in which welfare is offered.
"That is one of the distinctive things that I think the Church offers and benefits the country as a whole."
