The experts who compiled the report discovered that the poor reading standards among kids was due to the increasing stress of passing tests and exams at such a young age.
The report cautioned the system could be giving a third of youngsters the wrong grades.
"Half a billion pounds was spent on the National Literacy Strategy with almost no impact on reading levels," the Mirror quoted paper author Professor Peter Tymms of Durham University, as saying.
National Union of Teachers leader Steve Sinnott requested the Government to do away with the testing system.
"Its only effect seems to be to create stress for pupils and teachers," Sinnott said.
However, Schools Minister Lord Adonis insisted that primary reading standards were "at their highest level ever".