Among the analysis, the report found that the British diet has shifted considerably in recent history.
While the origin of food is becoming a more important factor, people have been eating more pre-prepared foods in the last ten years.
And the health implications of a poor diet are catastrophic.
Prime Minister Gordon Brown asked for the study in order to determine the implications of the main trends in the food industry, as well as the wider economy, society and the environment.
The report is expected be used to inform subsequent government policies.
The study, "Food: An analysis of the issues" , was carried out by the Strategy Unit within the Cabinet Office, in cooperation with Defra, the Department of Health and the Food Standards Agency.
What people are eating Findings showed that the composition of the British diet is changing, with consumption of milk, fresh meat and potatoes falling over the past 30 years.
Meanwhile, the purchase of fruit and vegetables increased rapidly between 1977 and 1990, and has since continued to grow, but at a steady rate.
Consumption of pre-prepared foods, such as ready meals and supermarket pizzas has trebled since 1997.
Health An estimated 70,000 premature deaths in the UK could be prevented each year if UK diets matched nutritional guidelines, according to the report.
The nation's poor diet costs the economy £10bn (€13.5bn), of which £7.7bn (€10.4bn) covers NHS treatment that could be avoided if people cut down on fatty and salty foods.
The report said increasing fruit and vegetable intake to five a day would save 42,200 lives each year.
The other challenges outlined in the report for the government and the food industry were reducing salt intake to an average of 6g, cutting saturated fat intake by 2.3 per cent of energy, and cutting sugar intake by 1.75 per cent of energy.
The report also showed how parents are letting their children down in terms of diet, with children on average eating only 2.5 portions of fruit and vegetables a day.
At the same time however, consumers are becoming more health conscious and demanding healthier food, for which 36 per cent of people are prepared to pay extra.
Origin The report suggested that more consumers want to know where their food is from, with local food in higher demand than ever before.
One survey estimated the turnover of the UK regional food sector at £5bn (€6.7bn), with a growth of 30 per cent between 2003 and 2006.
It now accounts for 7 per cent of total turnover of food and drink manufacturing in England.
Seventy-one per cent of respondents said they would rather buy products that were grown or produced locally.
At the same time, food imports have grown significantly as a consequence of consumer choice and of more integrated food markets, access to which keeps food available to consumers when UK supplies fail.
The UK's largest trade gap in food commodities is in fruit and vegetables.
In reference to another previous report, 25 per cent of respondents said country of origin labelling was very important, and a further 29 per cent said it was quite important.
There is an increasing demand for ethically produced foods, with the market growing by £5.4bn (€7.3bn) in 2005.
However, sales of ethical food still only account for 5 per cent of the average shopping basket.
Consumers are also becoming more concerned about the environmental impact of their food, particularly regarding packaging.
Food safety While progress in tackling food-borne diseases was referenced in the report, there are still more than 300,000 reported cases of food poisoning every year with a significant microbiological contamination on the food system.
In 2006, between 600 and 700 people died as a direct result of something they ate, with the main cause being food poisoning.
New cases of BSE have fallen from 37,000 per year at the peak of the epidemic in 2000, to 15 in 2006.
Reports to follow A spokesperson for the UK Food Standards Agency said : "The FSA welcomes today's publication of the Cabinet Office Strategy Unit report that looks at food and food policy in the UK .
"The FSA looks forward to continuing to work with other government departments as the project progresses and will continue to contribute fully to the further stages of its development."
The Strategy Unit is calling for comments and contributions on the first report.
A second part, now in progress, involves consulting on the trends, the challenges the UK faces in responding to the many issues in a coherent way, and how the government can help.
A third and final part will draw out policy implications and will be delivered to the Prime Minister this spring.