An influential European report has called for England’s councils to receive greater influence over local decisions.

Warning that the ability of local authorities to carry out their responsibilities appears to be ‘highly restricted by central government’, the Council of Europe has recommended greater devolution of powers to town halls alongside increased tax-raising powers and a fairer funding settlement.

A delegation from the international organisation visited the UK twice last year, performing its second ever review.

In its Local and regional democracy report, the Council of Europe warned austerity was placing huge pressure on the ability of local authorities to provide ‘essential public services, quality health and social care and effective and adequate community services’.

According to the report, town halls in Wales and Scotland are also ‘better off financially than their English counterparts’.

A complex system for the distribution of funding from central government is causing ‘considerable uncertainty’ and potential ‘unequal treatment’ – the report warned.

Local Government Association chairman, Merrick Cockell, said: ‘The current model for financing and running local government needs to change and adapt to today's circumstances and it is important that local and central government works together to address these issues and takes these recommendations forward.’

‘Devolution of decision-making and tax-raising powers to local areas is needed to help save money and improve services and English communities need to be given the same significant say over everything from health services to public transport as they do across the border in Scotland, Wales and Northern Ireland.’

Responding to the report, Local government Minister Brandon Lewis said: ‘The coalition government has delivered a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire. We have given councils new financial flexibilities, such as the local retention of business rates and scrapped top-down interfering quangos.

‘The UK Government has a strong record in promoting democracy, liberty and transparency. We welcome free debate, but we are not going to take lectures on this from Putin’s United Russia Party.’