The report provoked a furious row as it was condemned by Cabinet ministers as "seriously misguided" and the Church of England said it appeared to have been "hijacked" by humanists.

The report, by the Commission on Religion and Belief in Public Life, claims that faith schools are "socially divisive" and says that the selection of children on the basis of their beliefs should be phased out.

It also accuses those who devise some RE syllabuses of "sanitising" negative aspects of religion in lessons and suggests that the compulsory daily act of worship in school assemblies should be abolished and replaced with a "time for reflection".

The report backs moves cut the number of Church of England bishops in the Lords and give places to imams, rabbis and other non-other non-Christian clerics as well as evangelical pastors.

The Archbishop of Canterbury, the Most Rev Justin Welby, (second right) arrives for the General Synod of Church of England meeting at The University of York.

The Archbishop of Canterbury, the Most Rev Justin Welby, (second right) arrives for the General Synod of Church of England meeting at The University of York. Photo: PA

Meanwhile the coronation service for the next monarch should be overhauled to include other faiths, the report adds.

Controversially, it also calls for a rethink of anti-terror policy, including ensuring students can voice radical views on campus without fear of being reported to the security services.

And it also recommends new protections for women in Sharia courts and other religious tribunals -- including a call for the Government to consider requiring couples who have a non-legally binding religious marriage also to have a civil registration.

It also suggests that Thought of the Day on BBC Radio 4's Today programme should include non-religious messages.

The Commission on Religion and Belief in Public Life has attracted particular controversy because of the seniority of those behind it.

Its patrons include Rowan Williams, the former Archbishop of Canterbury, Lord Woolf, the former chief justice, and Sir Iqbal Sacranie, the former general secretary of the Muslim Council of Britain.

While gathering evidence the commissioners met key players including Justin Welby, the Archbishop of Canterbury; Ephraim Mirvis, the Chief Rabbi; the Home Secretary Theresa May, and senior executives at the BBC and Channel 4.

The Church of England said the report was a "sad waste" and had "fallen captive to liberal rationalism".

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A spokeswoman for the Church of England said: "The report is dominated by the old fashioned view that traditional religion is declining in importance and that non-adherence to a religion is the same as humanism or secularism."

A source close to Nicky Morgan, the Education Secretary, described the report's recommendations on faith schools as "ridiculous".

The source said: "Nicky is one of the biggest champions of faith schools and anyone who thinks she is going to pay attention to these ridiculous recommendations is sorely misguided."

The report highlights figures showing the decline in people who say they are Anglicans from 40 per cent in 1983 to less than a fifth in 2013.

It says: "Three striking trends in recent decades have revolutionised the landscape on which religion and belief in Britain meet and interact.

"The first is the increase in the number of people with non-religious beliefs and identities. The second is the decline in Christian affiliation, belief and practice and within this decline a shift in Christian affiliation that has meant that Anglicans no longer comprise a majority of Christians.

"The third is the increase in the number of people who have a religious affiliation but who are not Christian."

It goes on to say: "The increase in those with non-religious beliefs, the reduction in the number of Christians and an increase in their diversity, and the increase in the number of people identifying with non-Christian religions: these are the settled social context of Britain today and for the foreseeable future, as is the unsettled and unsettling context of the international environment".

Its central recommendation is for a national consultation exercise to draw up a 21st Century equivalent to the Magna Carta to define the values at the heart of modern Britain instead of the Government's controversial "British values" requirements.

"From recent events in France, to the schools so many of our children attend and even the adverts screened in cinemas, for good and ill religion and belief impacts directly on all our daily lives," said Lady Butler-Sloss.

"The proposals in this report amount to a 'new settlement for religion and belief in the UK', intended to provide space and a role for all within society, regardless of their beliefs or absence of them."

The 150-page report sets out a major shift away from Christianity in Britain -- particularly the Church of England -- with the number of people describing themselves as having no religion jumping from less than a third of the population to almost half in just 30 years.

At the same time it highlights the growth of non-Christian faiths, especially Islam, and an explosion in the number of newer Pentecostal and evangelical Churches outside of the traditional denominations.

But the report stops short of calling for the disestablishment of the Church of England, arguing that the special status of Anglicanism in England and the Church of Scotland north of the border, has helped other faith groups and "enables them to make their voice heard in the public sphere".

But it adds: "The relationship of the Church of England to the state has changed and is changing, and could change further.

"The pluralist character of modern society should be reflected in national forums such as the House of Lords, so that they include a wider range of worldviews and religious traditions, and of Christian denominations other than the Church of England"

It goes on to call for all national and civic events -- including the next coronation -- to be designed to reflect "the pluralist character of modern society".

Although the commission does not call for the abolition of faith schools, it questions the fundamental premise on which they exist.

"In England, successive governments have claimed in recent years that faith schools and free schools create and promote social inclusion leading to cohesion and integration," it says.

"However, it is in our view not clear that segregation of young people into faith schools has promoted greater cohesion or that it has not been socially divisive, leading to greater misunderstanding and tension."

But it also questions the approach to religion in universities and colleges, including measures to curb extremism on campus- particularly demands for lecturers to report students showing signs of extremism.

"Free debate should be possible without fear of students being labelled as extremists or attracting the attention of the security services," the report argues.

"That all said, universities will deal better with religion if they approach it as something that belongs to their intellectual discussions rather than an external factor with which they have to cope."

It also urges the Government to rethink its approach to the Muslim community in general, including consulting those it considers to have less "palatable" views on policy.

It says: "In its selection of organisations with which to engage the Government must guard against the perception that it is operating with a simplistic good Muslims/bad Muslims distinction, or between 'mainstream moderates' and 'violent or non-violent extremists'."

The report also suggests setting up an "advisory panel" of religious "experts" to examine complaints about coverage of religion in the press.

Keith Porteous Wood, executive director of the National Secular Society, said the report did not go far enough.

"There are some sensible recommendations in the Commission's report, but there is no escaping that the Commission is composed of vested interests and is unlikely to make recommendations for any radical change. Disestablishing the Church of England should be a minimum ambition for a modern Britain in the 21st century."

"This report promotes a multi-faith approach to public life which is completely at odds with the religious indifference that permeates British society."

The Rt Rev Michael Nazir-Ali, the former Bishop of Rochester, said: "As to the next coronation, I hope it doesn't come for a long time but when it comes, it will be an important occasion to reaffirm the constitutional basis of the nation.

"This is Judaeo- Christian through and through, with the monarch promising to uphold 'the Laws of God and the true profession of the Gospel'."

Rabbi Danny Rich, chief executive and senior rabbi of Liberal Judaism, said: "If we fail to recognise the diverse nature of our society in our civic institutions, our national events, our legal system, schools and media, we risk alienating large sections of our community who will see themselves as 'the other'.

"This in turn leads to them feeling excluded not just from the rights of British citizens, but also the obligations and standards of behaviour which go with being a full partner in British society.

"This is a huge a growing threat to us all."

END