The Casey Review into "opportunity and integration" in the UK makes sobering reading. It's a forensic look into how isolated and deprived communities actually work. Dame Louise Casey says in the foreword that she wanted to look at "what divides communities and gives rise to anxiety, prejudice, alienation and a sense of grievance".

Well, she found plenty. Many parts of the country don't offer opportunities and aren't integrated. Black boys still don't get jobs, white working class kids on free school meals still do badly in the education system, Muslim girls do brilliantly at school but don't go on to get great jobs.

More troublingly, there are "cultural and religious practices" in some communities – particularly Pakistani and Bangladeshi Muslim – that are "not only holding some of our citizens back but run contrary to British values and sometimes our laws". There are, Casey says, "too many religious leaders condoning or promoting intolerant and hateful teachings" and the peace-loving majority are "not being loud enough or bold enough to protect vulnerable individuals or to reduce the fear and suspicion of others". She goes into considerable detail about in the full report. If you're pressed for time, the summary is here.

The key section, though, is subtitled 'Leadership'. It says that for generations we've welcomed immigrants to our countries without really trying to integrate them. Now there are lots more of them and "leaders in public office" have failed to rise to the challenge. They don't want to be thought of as racists or Islamophobic. So abuse in particular communities might go unchallenged, like in the Rotherham child abuse case. Sharia courts can be badly run and leave women and children traumatised. "Accommodation" can go too far and "play into the hands of extremists".

Casey also says: "As a nation we have lost sight of our expectations on integration and lacked confidence in promoting it or challenging behaviours that undermine it."

The Casey Review explictly raises issues of huge importance. How far can communities be left to develop separately from the UK mainstream? Are we OK with supporting enclaves in our cities where people don't speak English and are still spiritually and mentally in rural Pakistan? How far should they be required to integrate?

Much of it is timely and needs saying. It can't really be right that the Department for Communities and Local Government spent more on promoting the Cornish language than English. And communities that don't relate to the world outside their own few streets are inevitably – and avoidably – impoverished, and not just materially.

However, there are implicit questions that the report doesn't seem to acknowledge at all. It is severe, and rightly, on religious leaders who teach hateful or extremist ideology. But in a telling comment, it says: "Too often, these views appear to be based on warped theology, designed to sustain the power of particular individuals or groups and to excuse or even legitimise their transgressions." Earlier it cites approvingly the work of Dilwar Hussein, who promotes a "modern British understanding of Islam".

What's happening here is that the state – in the person of Dame Louise – is attempting to do theology. It approves of certain kinds of religion and not of others. It wants religion to serve the purposes of the state. It has decided what "British values" are, and it is prepared to judge – and potentially control – anything that departs from them. There are serious implications here for religious liberty, a term that does not appear in the report (though "individual liberty" does).

The Casey Review is obviously right to highlight the dangers from Saudi investment in mosques teaching ultra-conservative Salafi Islam. It's also right to worry about misogynistic and homophobic teaching. But another example of what it thinks is unacceptably divisive is a leaflet urging Muslims to boycott a community music festival in a local park. Now, to a non-religious person this might seem odd, but it is absolutely no business of government to tell religious communities whether they should listen to music or not.

It also refers to "the treatment of women in some strictly Jewish Orthodox communities (with children reportedly being taught that a woman's role is to look after children, clean the house and cook) and newer Christian churches (with activists seeking to 'cure' people of homosexuality). All such instances undermine integration and should be challenged."

Let's be clear: women can do anything they want, and homosexuality can't be 'cured'. But when the state starts prescribing to faith communities what they should and shouldn't teach, it runs the risk of crossing a line that shouldn't be crossed.

Of course, one of the problems is that government does not understand religion – as the Archbishop of Canterbury said recently, it has "no grip" on what it means to be religious. It cannot grasp that for anyone serious about their faith – Muslim or Christian – it is not the state that judges the faith, but the faith that judges the state. The Casey Review includes these words, which are correct: "For all those involved, faith is not something incidental to their actions. It is fundamental: the font, the origin, the thing that makes these people who they are and do what they do." It demonstrates its tone-deafness to faith, however, in the next sentence: "To them, their faith is realised in action: in commitment to others; in caring; in compassion; in an all-embracing feeling of solidarity." In other words, it's just about being nice. The civil service recoils from the idea that it might be about God.  

No one with any sense believes that any of the abuses identified in the Casey Review ought to be unchecked. But where these arise from religion, any attempt by a liberal democracy to impose a solution is going to fail. If the government really wants genuine integration it needs to find a way of working with the grain of religion. There is little evidence as yet that it intends to try.

Follow Mark Woods on Twitter: @RevMarkWoods