The new Cambridge report on church, government and public welfare (Moral, But No Compass) raises plenty of important questions - which the immediate media furore is in danger of missing or distorting.
But after the first (pre-emptive) press flurry, some semblance of reasonable analysis and response will hopefully set in. The issue of faith communities and public services is so fraught with feeling on all sides, that this can be difficult.
Ekklesia's initial report is here (http://www.ekklesia.co.uk/node/7257 ) with more to follow. There is some further commentary on my own blog: http://faithinsociety.blogspot.com/2008/06/church-caught-in-spin-over-we... 
I have also commented on Thinking Anglicans: http://www.thinkinganglicans.org.uk/archives/003124.html#comments 
Alongside Moral, But No Compass, it is interesting to read the November 2007 report produced by the British Humanist Association with the backing of the Trades Union Congress and others: Quality and Equality: Human Rights, Public Services and Religious Organisations.