Arts Council England (ACE) has responded angrily to a report from the New Culture Forum, which accused the ACE of being "wasteful and unpopular" and called for the funding body to be abolished.

The New Culture Forum (NCF), a right wing think tank formed in 2006, has published a report called The Arts Council: Managed to Death?, in which it directs a number of criticisms at how the ACE operates.

NCF accuses ACE of wasting taxpayers' money due to increasing administrative costs, being amateurish in its approach to arts and sponsoring art projects that have "no real merit".

The report, by NCF's research fellow Marc Sidwell, also claims that ACE is - as a result of restructurings in 2003 and 2006 that centralised operations - failing to reach its aims due to increased bureaucracy.

It states: "The changes imposed have poisoned the culture of the Arts Council. It has been managed to death. Central art funding in recent years has meant money and talent being wasted in the chase for instrumental goals that distorted priorities and downgraded the art itself, as well as a managerial culture that has put paperwork before artistic achievement."

In its conclusion, the report declares that the ACE has become a disaster and that a radical overhaul of arts funding should be undertaken.

"The national Arts Council should be abolished, but the nine regional councils should be retained," the report says. "The watching brief for national strategic oversight would pass to DCMS, while the Crafts Council and Arts & Business should be returned to direct DCMS funding, and Arts & Business should regain the £2m for matchfunding that was taken away by ACE."

ACE quickly rebutted the accusations by claiming that the report was littered with false statistics and misrepresentations.

In its response, ACE said: "NCF has spectacularly missed the point. It claims to want to reduce bureaucratic burdens on artists and then proposes massively increasing them.

"The report is hampered and its analysis called into question by some basic errors and highly misleading factual inaccuracies. For instance, the report attests that the Arts Council's administrative costs have increased, whereas the opposite is true.

"After the merger with regional arts boards, Arts Council running costs were reduced from 10 per cent to 7 per cent of total income. Current running costs stand at 6.6 per cent of income and following the organisational review are set to reduce to 5.5 per cent, saving an extra £6.5m a year."

The saving of the £6.5m, announced earlier this year, will be made mainly due to ACE axing 24 per cent of its staff and reduce its operations to nine regional offices.