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The Commons’ culture, media and sport select committee says the combination of cuts by central and local government will have a significant impact on cultural institutions, forcing several to close.

The report says the council spent “far too much on itself” and played a “major role in a gross waste of public money” in supporting The Public, a multimedia gallery in West Bromwich that has been plagued by financial troubles.

“Mistakes have been made throughout and we were concerned by the inability of the chief executive to provide answers to our questions and the lack of a serious attempt to learn lessons or prevent a repetition,” says the report.

“We consider this to be a failure of leadership.” The report urges the council to set up an independent review of its “role in the failure of the project”.

Neither Alan Davey, chief executive of ACE, nor Dame Liz Forgan, its chairman, were in post during the period in question, although both were interviewed by the committee.

The report also urges the council to consider selling part of its £97m art collection, which includes works by Francis Bacon and David Hockney, to ease its financial troubles.

“At a time when the Arts Council is under serious financial pressures, strategic de-accessioning could make the collection more dynamic and financially sustainable,” it says.

It says at least half of the collection’s 7,500 works should be on display at any one time. At present, up to 75 per cent is not on show.

The report says it is “not convinced” of the need for the number of subsidised orchestras. At present, ACE funds seven chamber and eight symphony orchestras, while the BBC funds seven orchestral or choral bodies. The report urges the two funding bodies to identify areas of duplication.

The council, which has had its government funding cut by 29.6 per cent, is to announce its grant allocation on Wednesday. More than 100 bodies are expected to lose funding.

The report welcomes the national portfolio programme which has replaced the old allocation system, but is “concerned at the speed with which the ... council is undertaking the massive programme”. 

“There will inevitably be complaints that the process has been flawed and insufficiently rigorous,” it says.

The ACE said the report was “out of date in places”. “The Public is old news, and is not representative of the Arts Council’s investments in capital projects. Selling off works of art from the Arts Council collection is also not a sensible solution to the current budget cuts,” it added.