A key NHS reform has been labelled a failure by an influential think tank.

The Institute for Public Policy Research said on Monday that the primary care trust system suffers from poor management and a lack of capacity.

PCTs were introduced by ministers in 2000 as a flagship health reform designed to devolve decision making to the frontline of patient care.

England's 303 PCTs are responsible for GPs and community health, public health and the commissioning of secondary care in hospitals, holding 80 per cent of NHS budgets.

But the IPPR said in a new report that leadership problems and shortages of staff and services had hit their effectiveness.

"It is not surprising that they still fall short of expectations of them leading a more decentralised NHS," said senior research fellow Deborah Roche.

"The government needs to close the gap between expectations of PCTs and their capacity.

"PCTs need to develop their commissioning role and involve a wider range of practitioners and the public more effectively.

"If they can resolve the dilemma of meeting central targets and local needs they should be able to overcome the historical dominance of the acute sector in the NHS."

But the think tank, favoured by Tony Blair, said the system should be reformed rather than overhauled if it is to meet government ambitions of devolution.

"A quick glance through recent history shows the Conservatives made similar claims in the 1970s," Roche said.

"Only by supporting improvements in PCTs, can government really move things forward and see through its commitment to decentralisation in the health service."

The Department of Health said the system was still in infancy and now benefiting from extra cash.

"We are pleased with the progress that has been achieved so far by primary care trusts," a spokesman said.

"More than two thirds of PCTs now have either a two or three star rating.

"We are confident that as capacity grows even more progress can be secured."