The idea of a local GDS to achieve efficiencies of scale in creating digital services for local government was mooted last year by various parties.

However, the Digital Government Review final report said that the idea would not work.

It said: “Such a model cannot be directly transplanted into local government, where there is a more complex cultural and political challenge constantly being addressed: how to deliver cost-effective digital services that are right for the people and communities represented by each democratically elected local authority.”

Instead, it said that a new national organisation should be charged with creating “local digital factories” to engender collaboration between groups of councils.

The document said: “Two authorities may choose to jointly tackle a problem with parking, two other authorities may choose to jointly tackle a problem with alcohol dependency,five others may choose to engage a single supplier to investigate integrated healthcare; whilst a Regional Digital Service may choose to tackle housing.”

Results of collaboration should be open for others to reuse, the review said, while central government would also participate and support the new national organisation, to help share best practice.

The body could also help adapt central government website standards for local government needs, produce solutions for the challenges produced by integrated healthcare, or developing approaches for local government procurement.

Funding for the organisation, however, would come from the local government sector from savings enabled by collaboration.

Elsewhere, the review also said that GDS should be allowed to work with local government on techniques and best practice.

Speaking at the launch event, Labour’s shadow Cabinet Office minister Chi Onwurah, said: "GDS has been barred from working with local government and we want to see that change. Many smaller councils can’t rise to the challenge of digital and it is not right that they should be expected to succeed where government departments with higher budgets have failed.”

Onwurah also announced that any future Labour government would launch a review to produce a “coherent and ethical approach” to the use of data.

The report will now be considered and costed by the Labour Party as part of its policy review process.