In her study, which is expected to be published within weeks, Dame Louise will detail the stark impact of segregation in communities that have grown up across Britain in recent years.
Speaking at a recent meeting of council leaders, she set out her early findings and challenged officials to battle political correctness in order to address the deep divisions that exist between different sections of society.
She criticised councils for "over worrying" about causing offence among minority groups. This attitude led one community centre she visited to put up a "festive tree" because the "incredibly well-meaning white manager" did not want to offend his Asian and Muslim staff by using the word "Christmas".
"What offence did he think he was causing? What did we ever think would be offensive about celebrating Christmas with a tree?" Dame Louise said.
While examples like this may seem harmless, similar attitudes led officials in Rotherham to turn a blind eye to the fact that child sexual exploitation was being perpetrated by men from Pakistani backgrounds, she said.
"The council and police were in denial about what was happening in their town," she said. "That was a tragic failure on so many levels, not least for the victims who weren't heard or whose abuse could have been prevented."
Only by promoting "core" British laws, traditions and cultures in every ethnic community can Britain hope to ensure that diverse communities integrate fully, and defeat the "hate mongers" from the far Right and Islamist extremists who want to divide the country, she argued.
"I have become convinced that it is only the upholding of our core British laws, cultures, values and traditions that will offer us the route map through the different and complex challenge of creating a cohesive society."
In what will be seen as a criticism of trends such as the growth of sharia courts in some Muslim communities, she said all citizens from every background must be made to adhere to the same set of laws which are "specifically intended to help define how we live together".
"One set of laws democratically decided and with the intention that they are upheld by every community in the land, new or old.
"We need to be much bolder in not just celebrating our history, heritage and culture, but standing up for our democratically decided upon laws of the land and standing up to those that undermine them."
Dame Louise suggested that elected politicians should also be held to a higher standard, raising the idea that councillors and even MPs should have to swear oaths to serve all citizens, and accord "equal respect to all people".
She told the councillors that her report would propose that more money should be spent on schemes to integrate communities.
But she argued that the most important reform would be in attitudes among state officials, calling for a more open and honest discussion of the impact of migration and segregation. "It is easy to say the easy things, to make excuses," she said. "It's tougher to tell the truth and find the solutions.
"It is not racist to say that the pace and rate of immigration has created a lot of change in Britain and for some people that feels too much. Or that when a large number of people from a different ethnic or religious background suddenly move into an area that it can be unsettling for those already resident there; or that when a school has a large religious minority population, it can change its character quite quickly.
"Not talking about this and the issues that arise from it only creates more tensions."
